Module: | Deposits, Reserve Ratios & Branch Authorisation
Q291: Which of the following pairs correctly identifies the legal provisions governing CRR and SLR respectively?
1. CRR: Banking Regulation Act, 1949; SLR: RBI Act, 1934
2. CRR: RBI Act, 1934; SLR: Banking Regulation Act, 1949
3. CRR: RBI Act, 1934; SLR: RBI Act, 1934
4. CRR: Banking Regulation Act, 1949; SLR: Banking Regulation Act, 1949
Which of the statements given above is/are correct?
2. CRR: RBI Act, 1934; SLR: Banking Regulation Act, 1949
3. CRR: RBI Act, 1934; SLR: RBI Act, 1934
4. CRR: Banking Regulation Act, 1949; SLR: Banking Regulation Act, 1949
Which of the statements given above is/are correct?
✅ Correct Answer: B
The correct answer is B. The legal provisions for the reserve ratios are distinct to avoid overlap between the central banking statute and the commercial banking statute.
The Cash Reserve Ratio (CRR) is governed by Section 42(1) of the Reserve Bank of India Act, 1934, which mandates scheduled banks to park a specific average daily balance with the RBI.
Conversely, the Statutory Liquidity Ratio (SLR) is governed by Section 24(2A) of the Banking Regulation Act, 1949, which requires banks to maintain a minimum percentage of their net demand and time liabilities in liquid assets.
Option A reverses these statutes, falsely associating CRR with the BR Act and SLR with the RBI Act.
Option C incorrectly attributes both ratios to the RBI Act, entirely ignoring Section 24 of the BR Act.
Option D makes the opposite error, incorrectly attributing both to the Banking Regulation Act, thus ignoring the RBI's central role in managing cash reserves.
The Cash Reserve Ratio (CRR) is governed by Section 42(1) of the Reserve Bank of India Act, 1934, which mandates scheduled banks to park a specific average daily balance with the RBI.
Conversely, the Statutory Liquidity Ratio (SLR) is governed by Section 24(2A) of the Banking Regulation Act, 1949, which requires banks to maintain a minimum percentage of their net demand and time liabilities in liquid assets.
Option A reverses these statutes, falsely associating CRR with the BR Act and SLR with the RBI Act.
Option C incorrectly attributes both ratios to the RBI Act, entirely ignoring Section 24 of the BR Act.
Option D makes the opposite error, incorrectly attributing both to the Banking Regulation Act, thus ignoring the RBI's central role in managing cash reserves.