What was the lower ceiling of Statutory Liquidity Ratio (SLR) which was amended in 2007 by the Government of India?

Question

UnlockIAS · Accepted Answer

Correct — B, 25%. Section 24 of the Banking Regulation Act, 1949 originally fixed the Statutory Liquidity Ratio (SLR) within a statutory band of 25%-40% of a bank's Net Demand and Time Liabilities (NDTL) — RBI could not legally set it below 25%. The Banking Regulation (Amendment) Act, 2007 removed this 25% floor, giving RBI full discretion to fix SLR anywhere up to 40% (including below 25%) as a monetary-policy tool.

Why the other options are wrong — (a) Not the statutory floor — the actual pre-2007 legal minimum for SLR fixed by the Banking Regulation Act was 25%, not 24%.  (c) Not a threshold the Banking Regulation Act ever specified for SLR's lower limit.  (d) Also not the statutory floor removed in 2007; the legal minimum being amended away was 25%.

Concept: SLR is the minimum percentage of a bank's Net Demand and Time Liabilities (NDTL) that it must hold in approved liquid assets — cash, gold, or government securities — before lending out the rest. It is fixed by the RBI under Section 24 of the Banking Regulation Act, 1949, and works alongside the Cash Reserve Ratio (CRR) as one of India's key reserve-based monetary tools.

State PCS 2024 Q31 — Economy PYQ with Answer

State PCS 2024 Q31 — Economy PYQ with Answer