Which of the following terms indicates a mechanism used by commercial banks for providing credit to the government?
Reviewed by Dalvoy
UPSC Civil Services preparation
- ACash Credit RatioCorrect
- BDebt Service Obligation
- CLiquidity Adjustment Facility
- 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.

Related questions
More UPSC Prelims practice from the same subject and topic.
- Prelims 2010GS1economy
With reference to the Non-banking Financial Companies (NBFCs) in India, consider the following statements:
- Prelims 2010GS1economy
Which of the following is/are treated as artificial currency?
- Prelims 2010GS1economy
In India, the interest rate on savings accounts in all the nationalized commercial banks is fixed by
- Prelims 2010GS1economy
When the Reserve Bank of India announces an increase of the Cash Reserve Ratio, what does it mean?
- Prelims 2010GS1economy
In India, which of the following is regulated by the Forward Markets Commission?
- Prelims 2010GS1economy
With reference to the institution of Banking Ombudsman in India, which one of the statements is not correct?