In the context of Indian economy, which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’?

1. To enable the Central Bank to control the amount of advances the banks can create
2. To make the people’s deposits with banks safe and liquid
3. To prevent the commercial banks from making excessive profits
4. To force the banks to have sufficient vault cash to meet their day-to-day requirements

Select the correct answer using the code given below.

Statutory Reserve Requirements (SRR) refer to the percentage of total deposits that commercial banks are required to keep with the central bank (RBI in India).

The purposes of SRR are:

1. Statement 1 is correct. To enable the RBI to control the amount of advances banks can create through fractional reserve banking. By increasing/decreasing SRR, RBI can decrease/increase the loanable funds available with banks. This helps control inflation.
2. Statement 2 is correct. To make people's deposits with banks safe and liquid. SRR helps ensure banks have enough liquid cash to meet withdrawal demands.
3. Statement 3 is incorrect - SRR is not meant to control bank profits.
4. Statement 4 is incorrect - SRR funds are kept with RBI, not as vault cash.