Module: | Priority Sector, Consumer Protection & Digital Lending
Q69: Regarding "State Development Loans" (SDLs) in the context of banking liquidity:
1. SDLs are issued by State Governments to manage their fiscal deficits.
2. SDLs are considered "Approved Securities" for SLR maintenance.
3. SDLs carry a sovereign guarantee, similar to Central Government securities.
Which of the statements given above is/are correct?
2. SDLs are considered "Approved Securities" for SLR maintenance.
3. SDLs carry a sovereign guarantee, similar to Central Government securities.
Which of the statements given above is/are correct?
✅ Correct Answer: D
The correct answer is D. All three statements accurately describe State Development Loans (SDLs). Statement 1 is correct: State governments issue dated securities, known as SDLs, through RBI auctions to fund their budgetary/fiscal deficits.
Statement 2 is correct: Under Section 24 of the Banking Regulation Act, 1949, SDLs hold the official status of "Approved Securities," making them fully eligible for banks to hold to meet their Statutory Liquidity Ratio (SLR) requirements.
Statement 3 is correct: Because they are issued by sub-national sovereign entities (States), SDLs carry an implicit sovereign guarantee.
Consequently, the RBI assigns them a zero percent risk weight, putting them on par with Central Government Securities (G-Secs) in terms of safety and capital adequacy requirements.
Statement 2 is correct: Under Section 24 of the Banking Regulation Act, 1949, SDLs hold the official status of "Approved Securities," making them fully eligible for banks to hold to meet their Statutory Liquidity Ratio (SLR) requirements.
Statement 3 is correct: Because they are issued by sub-national sovereign entities (States), SDLs carry an implicit sovereign guarantee.
Consequently, the RBI assigns them a zero percent risk weight, putting them on par with Central Government Securities (G-Secs) in terms of safety and capital adequacy requirements.