{"id":79741,"date":"2025-12-26T15:37:25","date_gmt":"2025-12-26T10:07:25","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=79741"},"modified":"2025-12-26T15:37:25","modified_gmt":"2025-12-26T10:07:25","slug":"statutory-liquidity-ratio-slr","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/statutory-liquidity-ratio-slr\/","title":{"rendered":"Statutory Liquidity Ratio (SLR), Meaning, Objectives, Components"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The <\/span><b>Statutory Liquidity Ratio (SLR)<\/b><span style=\"font-weight: 400;\"> is the minimum percentage of a commercial bank\u2019s deposits that must be maintained in the form of <\/span><b>cash, gold, or government-approved securities<\/b><span style=\"font-weight: 400;\">. It is mandated by the <\/span><b>Reserve Bank of India (RBI)<\/b><span style=\"font-weight: 400;\"> to regulate liquidity and ensure financial stability. The main <\/span><b>objectives<\/b><span style=\"font-weight: 400;\"> of SLR are to control credit flow, manage inflation, and ensure the solvency of banks. Its <\/span><b>major components<\/b><span style=\"font-weight: 400;\"> include <\/span><b>liquid assets<\/b><span style=\"font-weight: 400;\"> and <\/span><b>Net Demand and Time Liabilities (NDTL)<\/b><span style=\"font-weight: 400;\"> of banks.<\/span><\/p>\n<h2><b>What is Statutory Liquidity Ratio?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The <\/span><b>Statutory Liquidity Ratio (SLR)<\/b><span style=\"font-weight: 400;\"> is the minimum percentage of a bank\u2019s <\/span><b>Net Demand and Time Liabilities (NDTL)<\/b><span style=\"font-weight: 400;\"> that must be maintained in the form of <\/span><b>liquid assets<\/b><span style=\"font-weight: 400;\"> such as cash, gold, or government securities. It is prescribed by the <\/span><b><a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/reserve-bank-of-india\/\" target=\"_blank\">Reserve Bank of India<\/a> (RBI)<\/b><span style=\"font-weight: 400;\"> as a tool of monetary policy. Unlike CRR, SLR is maintained by banks <\/span><b>with themselves<\/b><span style=\"font-weight: 400;\"> and not with the RBI. SLR helps control credit growth, ensure bank solvency, and maintain liquidity in the economy.<\/span><\/p>\n<h2><b>Statutory Liquidity Ratio (SLR) Objectives<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The Statutory Liquidity Ratio is maintained to regulate the lending capacity of banks and ensure financial stability in the economy. By mandating banks to hold a portion of deposits in liquid assets, RBI controls credit flow and inflation.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To prevent excessive credit creation and over-lending by banks<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To control inflation by restricting liquidity during inflationary periods<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To encourage banks to invest in government securities<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To ensure solvency and financial stability of banks<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To regulate money supply as a tool of monetary policy<\/span><\/li>\n<\/ul>\n<h2><b>Major Components of Statutory Liquidity Ratio<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The Statutory Liquidity Ratio is calculated based on a bank\u2019s <\/span><b>Net Demand and Time Liabilities (NDTL)<\/b><span style=\"font-weight: 400;\"> and the liquid assets it holds. These components together determine the minimum liquidity that banks must maintain as prescribed by the RBI.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Liquid Assets:<\/b><span style=\"font-weight: 400;\"> Assets that can be easily converted into cash, including cash balances, gold, treasury bills, government bonds, government-approved securities, and securities issued under Market Stabilisation Scheme (MSS) and market borrowing programmes.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Net Demand and Time Liabilities (NDTL):<\/b><span style=\"font-weight: 400;\"> Total liabilities of a bank payable to the public.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Demand Liabilities:<\/b><span style=\"font-weight: 400;\"> Current deposits, demand drafts, balances in overdue fixed deposits, and the demand portion of savings bank deposits.<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Time Liabilities:<\/b><span style=\"font-weight: 400;\"> Fixed deposits, time portion of savings bank deposits, and staff security deposits.<\/span><\/li>\n<\/ul>\n<h2><b>Difference Between Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)<\/b><\/h2>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/cash-reserve-ratio\/\" target=\"_blank\"><strong>Cash Reserve Ratio<\/strong><\/a> and Statutory Liquidity Ratio are quantitative monetary policy tools used by the RBI to control liquidity and credit creation in the banking system. The Difference Between Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) have been highlighted below:<\/span><\/p>\n<table style=\"width: 84.3751%;\">\n<tbody>\n<tr>\n<td class=\"tb-color\" style=\"text-align: center; width: 104.386%;\" colspan=\"3\"><b>Difference Between Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)<\/b><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center; width: 19.1729%;\"><b>Basis of Difference<\/b><\/td>\n<td style=\"text-align: center; width: 36.7168%;\"><b>Cash Reserve Ratio (CRR)<\/b><\/td>\n<td style=\"text-align: center; width: 48.4962%;\"><b>Statutory Liquidity Ratio (SLR)<\/b><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 19.1729%;\">\n<p><span style=\"font-weight: 400;\">Full Form<\/span><\/p>\n<\/td>\n<td style=\"width: 36.7168%;\">\n<p><span style=\"font-weight: 400;\">Cash Reserve Ratio<\/span><\/p>\n<\/td>\n<td style=\"width: 48.4962%;\">\n<p><span style=\"font-weight: 400;\">Statutory Liquidity Ratio<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 19.1729%;\">\n<p><span style=\"font-weight: 400;\">Maintained With<\/span><\/p>\n<\/td>\n<td style=\"width: 36.7168%;\">\n<p><span style=\"font-weight: 400;\">Reserve Bank of India<\/span><\/p>\n<\/td>\n<td style=\"width: 48.4962%;\">\n<p><span style=\"font-weight: 400;\">Bank itself<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 19.1729%;\">\n<p><span style=\"font-weight: 400;\">Form of Reserve<\/span><\/p>\n<\/td>\n<td style=\"width: 36.7168%;\">\n<p><span style=\"font-weight: 400;\">Cash only<\/span><\/p>\n<\/td>\n<td style=\"width: 48.4962%;\">\n<p><span style=\"font-weight: 400;\">Cash, gold, and government securities<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 19.1729%;\">\n<p><span style=\"font-weight: 400;\">Interest Earnings<\/span><\/p>\n<\/td>\n<td style=\"width: 36.7168%;\">\n<p><span style=\"font-weight: 400;\">No interest earned<\/span><\/p>\n<\/td>\n<td style=\"width: 48.4962%;\">\n<p><span style=\"font-weight: 400;\">Interest earned on government securities<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 19.1729%;\">\n<p><span style=\"font-weight: 400;\">Objective<\/span><\/p>\n<\/td>\n<td style=\"width: 36.7168%;\">\n<p><span style=\"font-weight: 400;\">Control liquidity in the banking system<\/span><\/p>\n<\/td>\n<td style=\"width: 48.4962%;\">\n<p><span style=\"font-weight: 400;\">Control credit expansion and ensure solvency<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 19.1729%;\">\n<p><span style=\"font-weight: 400;\">Effectiveness<\/span><\/p>\n<\/td>\n<td style=\"width: 36.7168%;\">\n<p><span style=\"font-weight: 400;\">More effective liquidity control tool<\/span><\/p>\n<\/td>\n<td style=\"width: 48.4962%;\">\n<p><span style=\"font-weight: 400;\">Relatively less effective than CRR<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 19.1729%;\">\n<p><span style=\"font-weight: 400;\">Legal Provision<\/span><\/p>\n<\/td>\n<td style=\"width: 36.7168%;\">\n<p><span style=\"font-weight: 400;\">RBI Act, 1934<\/span><\/p>\n<\/td>\n<td style=\"width: 48.4962%;\">\n<p><span style=\"font-weight: 400;\">Banking Regulation Act, 1949<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"<p>Statutory Liquidity Ratio(SLR) explained with meaning, objectives, major components, NDTL and key differences between SLR and CRR under RBI monetary policy in India.<\/p>\n","protected":false},"author":27,"featured_media":79781,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[786],"tags":[4433],"class_list":{"0":"post-79741","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-general-studies","8":"tag-statutory-liquidity-ratio","9":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/79741","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/27"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=79741"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/79741\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/79781"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=79741"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=79741"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=79741"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}