Q. Which of the following provision (s) is/are covered under “Banking Regulations Act, 1949”?
1. Bank Rate
2. Statutory Liquidity Ratio
3. Cash Reserve Ratio
Select the correct answer using the codes given below:
Bank Rate: Under Section 49 of the Reserve Bank of India Act, 1934, the Bank Rate has been defined as “the standard rate at which the Reserve Bank is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under the Act.
- On introduction of LAF, discounting/rediscounting of bills of exchange by the Reserve Bank has been discontinued.
- As a result, the Bank Rate became dormant as an instrument of monetary management.
- It is now aligned to MSF rate and used for calculating penalty on default in the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR).
Statutory Liquidity Ratio: In terms of Section 24 of the Banking Regulations Act, 1949, scheduled commercial banks have to invest in unencumbered government and approved securities certain minimum amount as statutory liquidity ratio (SLR) on a daily basis.
Cash Reserve Ratio: According to Section 42 of the Reserve Bank of India Act, 1934, each scheduled commercial bank has to maintain a minimum cash balance with the Reserve Bank as cash reserve ratio (CRR) which is prescribed by the Reserve Bank from time to time as certain percentage of its net demand and time liabilities (NDTL) relating to the second preceding fortnight.
Source: RBI
