What
is Statutory Liquidity Ratio(Reserve Bank Of India)
SLR (Statutory Liquidity
Ratio) is the money a commercial bank needs to preserve in the form of cash, or
gold or government authorized securities (Bonds) before providing credit to
their own customers. SLR rate is decided by the RBI (Reserve Bank of India) as
well as to control the expansion of bank credit.
SLR((Statutory Liquidity Ratio) is the amount a commercial bank
needs to maintain in the form of cash, or gold or govt. approved securities
(Bonds) before providing credit to its customers. SLR rate is determined and
maintained by the RBI.
Every bank is required to maintain at the close of business every
day, a minimum proportion of their Net Demand and Time Liabilities as liquid
assets in the form of cash, gold and un-encumbered approved securities. The
ratio of liquid assets to demand and time liabilities is known as Statutory
Liquidity Ratio (SLR).
The maximum limit of SLR is 40% and minimum limit of SLR is 24%.
This limitation is added by RBI on banks to make funds available
to customers on demand at your earliest convenience. The maximum limit of SLR
is 40% and minimum limit of SLR is 23%.In India, Reserve Bank of India always
determines the percentage of Statutory Liquidity Ratio.
There are some statutory requirements for temporarily
placing the money in Government Bonds.
Following this requirement, Reserve Bank of India fixes the level
of Statutory Liquidity Ratio. At present, the minimum limit of Statutory
Liquidity Ratio that can be set by the Reserve Bank is 23% AS ON AUGUST
2012 Gold and G Secs (or Gilts) are included along with cash because the
two are highly liquid and secure assets.
Every bank is required to maintain at the close of business
every day, a minimum proportion of their Net Demand and Time Liabilities as
liquid assets in the form of cash, gold and un-encumbered approved securities.
The RBI can increase the SLR to contain inflation, suck liquidity
in the market, to tighten the measure to protect the customers’ money.
With the SLR (Statutory Liquidity Ratio), the RBI can ensure the
solvency a commercial bank. It is also helpful to control the expansion of Bank
Credits. By changing the SLR rates, RBI can increase or decrease bank credit
expansion. It is a part of deposits that Commercial Banks are supposed to maintain
with THEMSELVES IN LIQUID FORM.
No comments:
Post a Comment