Statutory liquidity ratio (SLR) refers amount that the commercial
banks require to maintain in the form of gold or / govt. approved securities
before providing credit to the bank customers.
Here by approved securities mean, bond and shares of different companies.
Statutory Liquidity Ratio is determined and maintained by the Reserve
Bank of India (RBI) in order to control the expansion of bank credit. It is
determined as percentage of total demand and time liabilities.
Time Liabilities refer to the liabilities, which the commercial banks
are liable to pay to the customers after a certain period mutually agreed upon
and demand liabilities are like deposits of the customers which are payable on
demand, example of time liability is a fixed deposits for six months, which is
not payable on demand but after 6 months. Example of demand liability is
deposit maintained in saving account or / current account, which are payable on
demand through a withdrawal form of a cheque.
SLR is used by bankers and indicates the minimum percentage of
deposits that the bank has to maintain in form of gold, cash or / other
approved securities.Thus, we can say that it is ratio of cash and some other
approved liabilities (deposits). It regulates the credit growth in India
The liabilities that the banks are liable to pay within one month's
time, due to completion of maturity period, are also considered as time
liabilities. The maximum limit of SLR is 40 % and minimum limit of SLR is 22.5
%.
In India, RBI always
determines the percentage of SLR. There are some statutory requirements for
temporarily placing the money in government bonds. Following this requirement,
RBI fixes the level of SLR. At present,
the minimum limit of SLR that can be set by the RBI is 22.5% as on 3rd June 2014.
A reduction of SLR rate looks eminent to support the credit growth in India.
From Wikipedia
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