What is SLR ratio of a bank ?
Amount that commercial banks are required to maintain before providing credit to customers.
The Statutory Liquidity Ratio (SLR) is the minimum percentage of its net demand and time liabilities that every bank must maintain in liquid assets: cash, gold and unencumbered approved securities, mainly government securities. It is prescribed under Section 24 of the Banking Regulation Act, 1949; in December 2014 it stood at 22 percent.
These liquid assets are kept by the bank itself, so SLR is an amount the bank must set aside before it can lend the rest of its resources to customers. By raising or lowering SLR, the RBI restricts or expands the funds available for credit.
The amount a bank keeps with the central bank is the Cash Reserve Ratio, and CRR is held only as cash balances, not as gold and securities. So the description of a deposit with the central bank mixes up SLR with CRR.
SLR is not a ratio of total deposits to total investments, and it has nothing to do with deposits placed with foreign banks.
Hence, Amount that commercial banks are required to maintain before providing credit to customers.
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