Statutory Liquidity Ratio


 
 
Concept Explanation
 

Statutory Liquidity Ratio

Statutory Liquidity Ratio (SLR):

Under section 24 and 56 of Banking regulation act, 1949 every commercial bank is required to maintain liquid assets in form of gold, RBI approved securities with itself before providing credit to its customers. SLR is determined by RBI. There is no minimum limit but maximum limit is 40 % of NDTL [Net Demand and Time Liability).

Formula = Liquid assets[Demand + Time liabilities] x 100

This term is used by bankers and it indicates the minimum percentage of deposits that a bank has to maintain in form of gold, cash or other approved securities.

  • SLR 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.
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