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”.

Originally written on May 19, 2015 and last modified on May 19, 2015.

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