Question Bank - Law Officer

Here's the question bank on all the law officer topics.

Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government?

A.
Cash Credit Ratio
B.
Debt Service Obligation
C.
Liquidity Adjustment Facility
D.
Statutory Liquidity Ratio

Solution:

The correct answer is Statutory Liquidity Ratio. Statutory Liquidity Ratio(SLR):-Commercial banks provide long-term credit to the government by investing their funds in government securities and short-term finance by purchasing Treasury Bills. This comes under SLR.Additional InformationCash Reserve Ratio(CRR):-CRR is a specific part of the total deposit that is held as a reserve by the commercial banks mandated by RBI.This reserve must be reserved in cash or cash equivalent.Liquidity Adjustment Facility:-A liquidity adjustment facility (LAF) is a tool used in monetary policy, primarily by the Reserve Bank of India (RBI) that allows banks to borrow money through repurchase agreements or to make loans to the RBI through reverse repo agreements.Debt Service Obligation:-Debt service is the cash that is required to cover the repayment of interest and principal on a debt for a particular period.

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