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.ÂSolution
- Repo rate (1) is correct : It is the rate at which banks borrow from RBI.Â
- CRR (2) is correct : Banks are required to keep a certain percentage of their deposits (NDTL) in cash with RBI to control liquidity.Â
- 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 .Â
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