What is meant by statutory liquidity ratio SLR?

Statutory Liquidity Ratio or SLR is a 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. The SLR is fixed by the RBI.

What is current statutory liquidity ratio?

18\%
Currently, the statutory liquidity ratio rate is 18\%. (As on August 27, 2020). RBI has kept 40\% as the maximum limit for SLR.

What is SLR and why RBI uses it?

Statutory liquidity ratio is a monetary policy tool that the Reserve Bank of India (RBI) uses to assess the liquidity at the banks’ disposal. SLR requires banks to keep a certain amount of their money invested in specific central and state government securities.

What is Statutory Liquidity Ratio (SLR)?

WHAT IS STATUTORY LIQUIDITY RATIO (SLR)? Statutory Liquidity Ratio or SLR is a 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 case of inflation?

In case of inflation in the economy the RBI uses SLR as a a means to suck liquidity from the market. When the banks have less money to deploy as loans they will increase the interest rates to maintain their profit margin. As loans become expensive the consumers borrow less and spend less.

What is the meaning of SLR?

Statutory Liquidity Ratio (SLR) refers to the amount maintained by commercial banks with themselves in the form of gold and government securities before lending or before giving credit to any of their customers. If commercial banks did not maintain the SLR they have to pay 3\% per annum above of the bank rate as the penalty to the RBI.

What is the difference between SLR and cash reserve ratio?

SLR has helped the government to sell its securities or debt instruments to banks. Most of the banks will be keeping their SLR in the form of government securities as it will earn them an interest income. Cash Reserve Ratio is the percentage of the deposit (NDTL) that a bank has to keep with the RBI.