Which among the following is most important functions being done by SLR in recent times?

Which among the following is most important functions being done by SLR in recent times?
[A]Control of Inflation
[B]Cushion against bank failures
[C]Financing Government deficits
[D]Adjustment of liquidity

Financing Government deficits
There are three purposes to keep SLR. These are:

  • It is an instrument of credit control
  • It works as a cushion against the possibility of bank failures
  • It is a conduit for financing government deficits.

We note here that SLR is not very frequently changed; so as an instrument of Credit Control; its role is limited. However, most important function SLR is doing in current times is to “finance the government deficit”.

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