2. introduction
Statutory Liquidity Ratio refers to the proportion of deposit, which the commercial banks
are required to maintain with them in form of liquid assets.
The liquid assets are assets readily convertible into cash including government bonds,
money market instruments, cash, gold, etc.
The SLR is determined by the central bank to control bank credit, ensure solvency and
compel bank to invest in the government securities.
Current SLR Rate is ___%. In case banks defaults in maintaining this percent, they are
charged penalty at rate 3-5%.
3. IMPORTANCE
One of the main objectives is to prevent commercial banks from liquidating their liquid
assets when the RBI raises the CRR.
SLR is used by the RBI to control credit flow in the banks.
In a way, SLR also makes commercial banks invest in government securities.
Making banks invest a portion of their deposits in government securities also ensures the
solvency of such banks.
SLR might be a monetary policy tool, but it has also helped the government sell a lot of
their securities. So SLR helps in the government’s debt management programme and RBI’s
monetary policy as well.
4. EFFECTS OF SLR RATE
INCREASE AND DECREASE BY RBI
ON ECONOMY
SLR SLR
5. Difference between c.r.r ands.l.r
Statutory Liquidity Ratio Cash Reserve Ratio
Reserves are in the form of liquid assets Reserves must be in the form of cash
SLR controls credit expansion CRR controls liquidity
Institutions earn interest on assets parked with
approved securities.
Institutions don’t earn any returns on cash
parked as CRR.
Liquid assets are maintained by the financial
institutions.
Cash reserves are maintained by the RBI
6. Merits of statutory liquidity ratio
Controls inflation in the economy.
Reducing SLR.
Raising SLR.
7. How is the statutory liquidity ratio calculated?
SLR = (Liquid Assets / (Time + Demand Liabilities))×100
8. Examples of approvedSLR securities
Dated securities of government of India.
Treasury bills of the government of India.
Dated securities of the government of India issued from time to time under the market
borrowing programme and the market stabilisation scheme.
State development loans (SDLs) issued from time to time under their market borrowing
programme.
Any other instrument as may be notified by the Reserve Bank of India.
