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Question

The Banking Regulation Act, 1949 is a key Act to regulate all banking firms in India. What is covered under the Section 24 of this Act?

A Repo operation by RBI under LAF Correct Answer Incorrect Answer
B Requirement of obtaining Banking licence from RBI Correct Answer Incorrect Answer
C Maintenance of CRR and SLR Correct Answer Incorrect Answer
D Maintenance of SLR and MSF Correct Answer Incorrect Answer
E CRAR requirements of banks Correct Answer Incorrect Answer

Solution

Section 24 of the Banking Regulation Act, 1949 requires the scheduled commercial banks to maintain minimum proportion of their Net Demand and Time Liabilities (NDTL) as liquid assets in the form of cash, gold and un-encumbered approved securities. This is referred to as the Statutory liquidity Ratio (SLR). Furthermore, under MSF window, banks can avail overnight, up to 2% of their respective NDTL outstanding at the end of the second preceding fortnight. In the event, the banks’ SLR holdings fall below the statutory requirement up to 2% of their NDTL, banks will not have the obligation to seek a specific waiver for default in SLR compliance arising out of use of this facility in terms of notification issued under sub section (2A) of Section 24 of the Banking Regulation Act, 1949.

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