Statutory Liquidity Ratio — UPSC Prelims PYQ 2010
Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government?
- Cash Credit Ratio
- Debt Service Obligation
- Liquidity Adjustment Facility
- Statutory Liquidity Ratio
Explanation
Option (d) is correct
- Statutory Liquidity Ratio is a mandatory requirement under which commercial banks must maintain a certain percentage of their net demand and time liabilities in the form of liquid assets such as government securities, cash and gold. By investing in government securities to meet the statutory liquidity ratio requirement, banks provide the government with credit.
Answer: (d) Statutory Liquidity Ratio
