Know Everything About Statutory Liquidity Ratio

Statutory Liquidity Ratio, or SLR for short, may sound like something you’d hear at a meeting of finance gurus, but it’s actually pretty simple. It’s a requirement for banks to maintain a certain percentage of their deposits in safe, liquid assets like government securities, bonds, and shares. In India, SLR is set by the Reserve Bank of India (RBI) and is used to maintain financial stability in the economy. But what does all of this mean for you and me? Let’s dive in and find out!

First of all, Statutory Liquidity Ratio is important because it ensures that banks have enough money set aside to cover any unexpected financial difficulties. By requiring banks to maintain a certain percentage of their deposits in safe, liquid assets, the RBI helps to prevent financial crises that can destabilize the economy.

Statutory Liquidity Ratio also has an impact on interest rates. When banks are required to maintain a higher SLR, they have less money available to lend, which can drive up interest rates. On the other hand, when the Statutory Liquidity Ratio is lowered, banks have more money to lend, which can lead to lower interest rates.

So, how is Statutory Liquidity Ratio calculated? The RBI sets a specific percentage of deposits that banks must maintain in safe, liquid assets. Currently, the SLR in India is set at 18% (31st March 2023). This means that for every INR. 100 that a bank receives in deposits, it must maintain INR. 18 in safe, liquid assets.

Whether you’re a saver or a borrower, SLR has an impact on interest rates and the overall health of the financial system. So, the next time you hear someone talking about SLR, you’ll know exactly what they’re talking about!

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