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MONETARY POLICY Statutory Liquidity Ratio PART 6 BY AYUSSH SANGHI
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Statutory Liquidity Ratio (SLR All banks of India have to keep a fraction of their total net time and demand liabilities in the form of liquid assets such as: G-secs, precious metals approved securities amongst others.
Statutory Liquidity Ratio (SLR The Ratio of these liquid assets to the total demand and time liabilities is called Statutory Liquidity Ratio. * This ratio was prescribed by the Section 24 (2A) of Banking Regulation Act 1949 * The original ratio mandated for a 23% SLR.
What all forms a part of SLR? SLR deposits include: Cash, Gold reserves kept in the bank Balances with RBI, * Net balance in Current Account & * Investment in Government Securities (if any). * SLR has to be maintained on a daily basis by every bank
What all forms a part of SLR? * The banking system of India has had very high SLR's in the 1980s, and highest in first two year of 1990s. * On the recommendations of Narsimham Committee I it was brought down from 38.5% to 25%. * At present, the SLR is 21% (August 2016)
Differences between CRR and SLR CRR and SLR are the quantitative instruments of Reserve Bank of India's monetary control policy. CRR indicates the quantum of cash that banks are required to keep with the Reserve Bank (in their premises) as a proportion of their net demand and time liabilities (NDTL) SLR prescribes the amount of money that banks must invest in securities issued by the government. This is not kept with RBI but with banks themselves.