What do you know by SLR?
SLR means statutory liquidity ratio. All commercial banks in India should keep with themselves cash/gold/government securities at certain percentage of their net demand and time liabilities compulsorily as per RBI guidelines.
At present the rate has been fixed as 21,75 percent. Net demand and time liabilities mean the total deposits comprising demand deposits and time deposits.
This has to be maintained on daily basis and has to be reported to RBI on fortnightly basis. RBI should not fix the rate more than forty percent at any point of time.
For example, ABC bank has total deposits to the tune of Rupees 1000000.oo crores, then the bank has to maintain SLR at 21.75 percent of 1000000.00 and it should be 217500.00 crores.
The about should be with the branches of the bank in the form of cash, gold and government securities and for non maintenance of statutory liquidity ratio RBI can impose penalty and the penalty gets increased for day by day
SLR stands for statutory liquidity ratio, which has to be maintained by banks as mandated by RBI. This means a certain ratio of deposits have to be maintained in the form of liquid assets such as cash, gold, money market instruments, government securities etc. Current SLR rate in India is 21%. This is separate from another ratio of deposits the banks have to maintain in form of cash, that is, Cash Reserve Ratio or CRR.
SLR means the Statutory liquidity ratio.
Banks have to invest certain percentage of their deposits in specified financial securities like Central Government or State Government securities. This percentage is known as SLR.
This money is predominantly invested in government approved securities (bonds), Gold, which mean the banks can earn some amount as ‘interest’ on these investments as against CRR where they do not earn anything.
Example – An Individual deposits say Rs 1000 in bank. Then Bank receives Rs 1000 and has to keep some percentage of it with RBI as SLR. If the prevailing SLR is 20% then they will have to invest Rs 200 in Government Securities
