| The securities approved to be kept as a pledge for satisfying SLR (Statutory Liquidity Ratio) norms includes |
| 1. Government security is a tradable instrument issued by the Central Government or the State Governments |
| 2. The Central Government issues both, treasury bills and bonds or dated securities |
| 3. The State Governments issue only bonds or dated securities, which are called the State Development Loans |
| 4. Government securities are called risk-free gilt-edged instruments. Select the correct answer using the codes given below: |
A) 1, 2 and 3 only
B) 1, 2 and 4 only
C) 1, 3 and 4 only
D) 1, 2, 3 and 4
Correct Answer: D
Solution :
[d] A Government security is a tradable instrument issued by the Central Government or the State Governments. It acknowledges the Government's debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more). In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs). Government securities carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. Government of India also issues savings instruments (Savings Bonds, National Saving Certificates (NSCs), etc.) or special securities (oil bonds. Food Corporation of India bonds, fertiliser bonds, power bonds, etc.). They are, usually not fully tradable and are, therefore, not eligible to be SLR securities.
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