Financial Awareness - Risk, Stability & Emerging Finance
The Narasimham Committee recommended the reduction of Statutory Liquidity Ratio (SLR) primarily to:
The Narasimham Committee recommended the reduction of Statutory Liquidity Ratio (SLR) primarily to:
medium Q7 of 15
Step-by-Step Solution
Step 1: Understand SLR and its impact
SLR is the minimum percentage of deposits banks must maintain in government securities, limiting funds available for lending.Step 2: Analyze the effect of reducing SLR
Reducing SLR frees up more funds for banks to lend, boosting credit availability.Final Answer:
Increase funds available for banks to lend → Option AQuick Check:
Reduction in SLR = more funds for bank lending ✅
Quick Trick: Remember SLR reduction frees bank funds for credit.
Common Mistakes:
- Confusing SLR reduction with inflation control or government borrowing.
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