◉ Statutory Liquidity Ratio :Statutory Liquidity Ratio (SLR) is the ratio of liquid assets to net demand and time liabilities (NDTL) which each bank is required statutorily to maintain. These liquid assets consist of excess reserves, unencumbered government and other approved securities and current account balance with other banks.
Statutory Liquidity Ratio is determined and maintained by Reserve Bank of India in order to control the expansion of bank credit.
The main objectives for maintaining the SLR ratio are the following :
● to control the expansion of bank credit. By changing the level of SLR, the Reserve Bank of India can increase or decrease bank credit expansion.
● to ensure the solvency of commercial banks.
● to compel the commercial banks to invest in government securities like government bonds.