Question

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

• A. Statutory Bank Ratio (SBR)
• B. Statutory Liquid Ratio (SLR)
• C. Central Bank Reserve (CBR)
• D. Central Liquid Reserve (CLR)

Answer 1

The Correct Option is B

The concept in question pertains to a financial regulation that banks must comply with, specifically related to maintaining a ratio between their cash or liquid assets and total assets. This regulation ensures that banks have enough liquid cash to meet any immediate liabilities that may arise. Let's examine the options given:

• Statutory Bank Ratio (SBR): This term isn't widely recognized in financial regulations and does not accurately describe the requirement for maintaining a ratio between cash and assets.
• Statutory Liquid Ratio (SLR): This is the correct option. SLR is the minimum percentage of a bank's net demand and time liabilities that must be maintained in the form of cash, gold, or other securities. It ensures the bank's solvency and its ability to pay depositors.
• Central Bank Reserve (CBR): Typically refers to reserves maintained by commercial banks with the central bank but doesn't directly relate to maintaining a cash-to-asset ratio.
• Central Liquid Reserve (CLR): This term is not standard terminology in banking and does not describe the cash-to-assets ratio requirement.

Option	Description
Statutory Liquid Ratio (SLR)	The correct regulation requiring banks to maintain a certain ratio between their liquid assets and total assets.