Q. Consider the following statements in the context of the statutory liquidity ratio (SLR) regime mandated by the Reserve Bank of India (RBI):

1. It provides strength to the financial system.
2. It increases the flow of credit to productive sectors.
3. It provides growth to the Indian economy.

Which of the above statements is/are correct?
Answer: Only 1
Notes: The SLR regime bolsters the financial system’s stability by requiring banks to maintain a minimum level of liquid assets, so Statement 1 is correct. However, it restricts banks’ lending ability, thereby reducing the flow of credit to productive sectors and potentially hampering economic growth. Therefore, Statements 2 and 3 are not correct.