Question
Download Solution PDFWith respect to money and banking, what does SLR stand for?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFKey Points
- Statutory Liquidity Ratio (SLR) is a requirement for commercial banks to maintain a certain percentage of their net demand and time liabilities (NDTL) in the form of liquid assets.
- The SLR is mandated by the Reserve Bank of India (RBI) to ensure the liquidity and solvency of banks.
- Assets that qualify for SLR include cash, gold, and government-approved securities.
- The SLR is a tool used by the RBI to control the expansion of credit and manage inflation in the economy.
- Changes in the SLR can affect the lending capacity of banks, influencing the overall economic activity.
Additional Information
- The Statutory Liquidity Ratio is different from the Cash Reserve Ratio (CRR), which requires banks to keep a certain percentage of their NDTL in cash with the RBI.
- The SLR is determined under the Banking Regulation Act, 1949.
- As of recent times, the SLR has been adjusted periodically based on the economic conditions and policy objectives of the RBI.
- Maintaining the SLR ensures that banks have sufficient liquid assets to meet depositor demands and contingencies.
- The SLR also helps in controlling the credit growth in the economy, thereby influencing inflation and economic stability.
Last updated on Jun 30, 2025
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