WBCS.LIVE practice question

What is the primary objective of the "Statutory Liquidity Ratio" (SLR)?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. To increase bank profits
  2. To control inflation and ensure bank solvency
  3. To encourage foreign investment
  4. To reduce the fiscal deficit

Correct answer and explanation

Correct answer: To control inflation and ensure bank solvency

Explanation: āœ… Correct Answer: B) To control inflation and ensure bank solvency šŸ“š Explanation: Statutory Liquidity Ratio (SLR) is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid assets like cash, gold, or government securities. By adjusting the SLR, the RBI can control the amount of credit that banks can offer, thereby managing inflation. It also acts as a safety buffer to ensure that banks can meet their liabilities to depositors.