Statutory Liquidity Ratio (SLR)
SLR refers to the minimum proportion of a bank's NDTL that must be maintained in liquid assets. Unlike CRR (cash with RBI), SLR allows banks to hold qualifying assets on their own books.
Eligible Assets
- •Cash (excluding CRR balances)
- •Gold valued at current market price
- •Approved securities — primarily dated government securities (G-Secs), State Development Loans (SDLs), and Treasury Bills
In practice, Indian banks predominantly hold government securities to fulfil SLR, as these earn interest income while satisfying the mandate.
Formula
SLR Amount = NDTL x (SLR % / 100)
Historical Context
SLR has been reduced from over 38% in the early 1990s to around 18% in recent years, reflecting policy to increase credit availability and reduce "financial repression" — where banks are mandated to hold government paper rather than lend freely.
SLR vs. CRR
| Parameter | SLR | CRR |
|---|---|---|
| Maintained with | Bank itself | RBI |
| Eligible assets | Cash, gold, G-Secs | Cash only |
| Interest earned | Yes (on G-Secs) | No |
| Goal | Solvency + G-Sec market support | Liquidity control |
Dual Purpose
SLR ensures banks maintain liquid assets (solvency buffer) while simultaneously creating captive demand for government securities — helping the government finance its fiscal deficit. Banks can borrow from RBI under the Marginal Standing Facility by pledging SLR securities above the minimum level.