Question

    Which of the following statements regarding Monetary

    Policy Instruments of RBI are correct?  Repo rate is the interest rate at which RBI lends money to commercial banks.  Cash Reserve Ratio (CRR) is the percentage of a bank’s total deposits or NDTL that must be kept with the RBI in cash.  Statutory Liquidity Ratio (SLR) is the portion of a bank’s net demand and time liabilities (NDTL) that must be maintained in the form of cash reserves. 
    A 1 and 2 only Correct Answer Incorrect Answer
    B 2 and 3 only Correct Answer Incorrect Answer
    C 1 and 3 only Correct Answer Incorrect Answer
    D 1, 2, and 3 Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    • Repo rate (1) is correct : It is the rate at which banks borrow from RBI. 
    • CRR (2) is correct : Banks are required to keep a certain percentage of their deposits (NDTL) in cash with RBI to control liquidity. 
    • SLR (3) is incorrect : SLR requires banks to hold a certain percentage of their net demand and time liabilities (NDTL) in the form of liquid assets (such as gold and government securities), and  not cash reserves . 

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