In India, statutory liquidity ratio is fixed by _____.
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. Reserve Bank of India.
In India, the Statutory Liquidity Ratio (SLR) is fixed by the Reserve Bank of India (RBI). SLR refers to the minimum percentage of a commercial bank's net demand and time liabilities (NDTL) that it must maintain in the form of liquid assets such as cash, gold, or approved government securities before providing credit to customers.
The primary purpose of SLR is to ensure the bank's solvency and control inflation by regulating the bank's leverage for credit expansion. By adjusting the SLR, the RBI can influence the money supply in the economy. For instance, a high SLR restricts the bank's ability to lend, thereby curbing inflation, while a lower SLR allows banks to lend more, encouraging economic growth.