What is SLR and how it works?
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What is SLR and how it works?
The ratio of these liquid assets to the demand and time liabilities is called the Statutory Liquidity Ratio (SLR). The Reserve Bank of India (RBI) has the authority to increase this ratio by up to 40\%. An increase in the ratio constricts the ability of the bank to inject money into the economy.
What is SLR Rate?
18.00\%
Objectives of RBI Monetary Policy
| Indicator | Current Rate |
|---|---|
| SLR | 18.00\% |
| Repo Rate | 4.00\% |
| Reverse Repo Rate | 3.35\% |
| Marginal Standing Facility Rate | 4.25\% |
What is the meaning of SLR in banking?
Statutory Liquidity Ratio (SLR) is typically defined as the ratio of a bank’s liquid assets to a bank’s net demand and time liabilities (NDTL). SLR is one of the reserve ratios that has to be maintained by all banks as per the mandate of RBI. The other reserve ratio is known as the cash reserve ratio (CRR).
What is the effect of SLR on the economy?
Increasing the SLR will control inflation in the economy while decreasing the statutory liquidity rate will cause growth in the economy. The SLR was prescribed by Section 24 (2A) of Banking Regulation Act, 1949. To know more about various banking reforms and acts, check the linked article.
What is SLR (Statutory Liquidity Ratio)?
Statutory Liquidity Ratio or SLR is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. It is basically the reserve requirement that banks are expected to keep before offering credit to customers.
What is the role of SLR in monetary policy in India?
Since the SLR has a role in determining the base rate of the country, the government of India and the Reserve Bank of India work together to make sure that the SLR is balanced. The statutory liquidity ratio is regularly monitored so that banks have a higher leverage and a better influencing aspect.