The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called

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Q: 76 (IAS/1998)
The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called
If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do ? 1. Cut and optimize the Statutory Liquidity Ratio 2. Increase the Marginal Standing Facility Rate 3. Cut the Bank Rate and Repo Rate Q. Select the correct answer using the code given below : (a) 1 and 2 only (b) 2 only (c) 1 and 3 only (d) 1, 2 and 3

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,388,81,19,388,18,44

keywords: 

{'statutory bank ratio': [0, 1, 0, 0], 'statutory liquid ratio': [0, 1, 0, 0], 'central bank reserve': [0, 1, 0, 0], 'banks': [5, 6, 5, 25], 'sbr': [0, 1, 0, 0], 'clr': [0, 1, 0, 0], 'cbr': [0, 1, 0, 0], 'central liquid reserve': [0, 1, 0, 0], 'total assets': [0, 1, 0, 0], 'slr': [0, 2, 1, 0], 'certain ratio': [0, 1, 0, 0], 'cash': [0, 1, 1, 3]}

The correct term for the ratio between a bank`s cash in hand and its total assets is SLR (Statutory Liquidity Ratio). The SLR is a financial regulation imposed by the central bank of a country (in the case of India, it is the Reserve Bank of India or RBI) that requires banks to maintain a certain percentage of their net demand and time liabilities in the form of liquid assets such as cash, gold, or government-approved securities.

The purpose of imposing the SLR is to ensure the solvency and stability of banks and to promote the liquidity of the banking system. By maintaining a certain proportion of liquid assets, banks are better equipped to meet any sudden increase in demand for withdrawals by depositors. It also acts as a safeguard against potential financial crises and helps in maintaining the overall stability of the banking sector.

The specific SLR requirement may vary from country to country and can be adjusted by the central bank based on economic conditions and policy objectives. In India, the SLR is determined by the Reserve Bank of India and is periodically reviewed and announced as part of its monetary policy measures.