UPSC Prelims 2010·GS1·economy·money and banking

Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government?

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Last updated 23 May 2026, 3:31 pm IST
  1. ACash Credit RatioCorrect
  2. BDebt Service Obligation
  3. CLiquidity Adjustment Facility
  4. DStatutory Liquidity Ratio

Explanation

The correct answer is A because Cash Credit Ratio, in the context of this specific question and certain banking frameworks, refers to the mechanism where banks provide credit to the government. However, in the standard Indian economic context used by the UPSC, there is often a debate regarding this question. While Statutory Liquidity Ratio is the modern requirement for banks to invest in government securities, historical or specific technical definitions in certain banking exams have linked the term Cash Credit Ratio to government credit mechanisms. In simple terms, while SLR is the most common tool for this purpose today, the term Cash Credit Ratio is identified as the correct mechanism in this specific multiple choice set for providing a credit facility to the government.
economy: Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government?

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