Question

Commercial banks in India are subject to a statutory liquidity requirement (SLR). Which of the following is not part of the SLR?

• A. Required reserves.
• B. Treasury bill.
• C. Unencumbered government and other approved securities.
• D. Current account balances with other banks.

Hint:

SLR includes liquid assets like government securities and cash, but not current account balances with other banks.

Answer 1

The Correct Option is D

Step 1: Comprehending the Statutory Liquidity Requirement (SLR).
The SLR dictates the minimum percentage of a commercial bank's net demand and time liabilities (NDTL) that must be held as liquid assets, including cash, gold, and government securities.

Step 2: Evaluating the options.
- (A) Required reserves: This is accurate. Banks are mandated to maintain reserves as a component of their SLR.
- (B) Treasury bill: This is accurate. Treasury bills qualify as eligible assets for SLR compliance.
- (C) Unencumbered government and other approved securities: This is accurate. Government securities are included in SLR calculations.
- (D) Current account balances with other banks: This is inaccurate. Balances in current accounts held with other banks do not constitute SLR-eligible liquid assets.

Step 3: Final determination.
Option (D) is the correct answer because current account balances with other banks are not considered part of the SLR.