What is SLR? | Statutory Liquidity Ratio
The requirement for banks to maintain a minimum percentage of their deposits in liquid assets like Gold or G-Secs. The twin of CRR.
Defining SLR
Statutory Liquidity Ratio (SLR) is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold, or other securities approved by the RBI.
Asset Diversity
Unlike CRR (which must be cash), SLR can be maintained in: - Cash - Gold - Government Securities (G-Secs) - State Development Loans (SDLs)
The Purpose of SLR
Banking Safety
It ensures that banks always have some liquid assets to meet the demands of their depositors, even during a crisis.
Govt Borrowing
SLR creates a captive market for government securities, helping the government borrow money more easily from the banking system.
Comparison: CRR vs SLR
| Feature | CRR | SLR |
|---|---|---|
| Form | Cash Only | Cash, Gold, G-Secs |
| Held With | RBI | Banks themselves |
| Interest | No Interest | Banks earn interest on G-Secs |