Define Statutory Liquid Ratio (SLR)
Banking involves many terms in itself. Some terms are easy to understand by a man while some are technical terms which need to be explained. Statutory Liquid Ratio or SLR is one of important terminology used in banking.
Definition of Statutory Liquid Ratio (SLR)
SLR term is associated with banking and the mandatory cash level to be maintained in banks. Commercial banks have to invest in liquid assets such as cash, precious metals like gold or government recognized bonds as per the directions of Reserve Bank of India (RBI). The cash maintained herein is not same as the cash resend with Central bank. RBI keeps an eye on SLR of each bank so as to keep a control on lending capacity of the banks. Statutory Liquid Ratio (SLR) is determined by total demand and supply
If you want to know that how to calculate Statutory Liquid Ratio (SLR), then you can do so by using following formula:
Statutory Liquid Ratio Rate= Total Demand/Time Liabilities X 100%
SLR rate in India is 24% with effect from 18 December, 2010.Objectives of Statutory Liquid Ratio (SLR)
Following are the reasons to maintain Statutory Liquid Ratio (SLR):