SLR

Economy

Quick Definition

SLR is the percentage of a bank’s total deposits that must be maintained in the form of liquid assets like cash, gold, or government securities.

Detailed Explanation

SLR is a key monetary tool used by the Reserve Bank of India to ensure banks maintain sufficient liquidity and financial stability.

Unlike CRR, banks keep SLR funds within their own system in liquid assets rather than depositing them with RBI.

How SLR Works

  • Increase in SLR:
    • Banks hold more liquid assets
    • Less money available for lending
    • Helps control inflation
  • Decrease in SLR:
    • Banks can lend more money
    • Increases liquidity
    • Supports economic growth

Components of SLR

  • Cash
  • Gold
  • Government securities (G-Secs)

SLR vs CRR

[Image comparing SLR and CRR highlighting where funds are kept and in what form]
  • SLR: Maintained by banks themselves
  • CRR: Maintained with RBI

Why SLR Matters

  • Ensures bank liquidity
  • Controls credit growth
  • Maintains financial stability

Example

"If SLR is 18% and a bank has ₹100 crore deposits, it must keep ₹18 crore in liquid assets like cash or government bonds."

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