STATUTORY LIQUIDITY RATIO (SLR) :

STATUTORY LIQUIDITY RATIO (SLR) :
- Is the amount a commercial bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers.
- SLR rate is determined and maintained by the RBI (Reserve Bank of India) in order ot control the expansion of bank credit.
- Generally this mandatory ration is complied by investing in Govt bonds.
- Under liquid the provision of Banking Regulation Act governing the banking operations, banks are required to hold liquid assets such as government securities, or other unencumbered approved securities, cash or gold, against their demand and time liabilities in India.
- This is known as supplementary reserve requirement or secondary reserve requirement.
- The main objective of this monetary policy instrument is to ensure solvency of commercial banks by compelling them to hold low risk assets up to a stipulated extent.
- It also helps to regulate the pace of credit expansion to commercial sector. SLR refers to the ratio of holdings of the prescribed liquid assets to total time and demand liabilities.