What is Statutory Liquidity Ratio (SLR)? (2024)

FAQs

What is the statutory liquidity ratio SLR? ›

Statutory Liquidity Ratio or SLR is a minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. It is basically the reserve requirement that banks are expected to keep before offering credit to customers.

Currently, the statutory liquidity ratio rate is 18% (As of February, 2022). RBI has kept 40% as the maximum limit for SLR. SLR is calculated as a percentage of all the deposits held by the bank. Another way to define the SLR meaning is the ratio of a bank's liquid assets to its net demand and time liabilities.

SLR Formula

SLR = (liquid assets / (demand + time liabilities)) * 100%.

This percentage is called the Statutory Liquidity Ratio (SLR). In our example, if the RBI mandates the banks to maintain an SLR of 20%, then the bank will keep Rs 2 Lakh in liquid assets and will be able to loan out only the remaining Rs 8 Lakh.

The supplementary leverage ratio is the US implementation of the Basel III Tier 1 leverage ratio, with which banks calculate the amount of common equity capital they must hold relative to their total leverage exposure. Large US banks must hold 3%.

Statutory Liquidity Ratio popularly called SLR is the minimum percentage of deposits that the commercial bank maintains through gold, cash and other securities. However, these deposits are maintained by the banks themselves and not with the RBI or Reserve Bank of India. Current SLR in India – 18.00%

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The SLR ratio is the percentage of a bank's net demand and time liabilities (NDTL) that it must maintain in the form of eligible assets. It is calculated by dividing the total value of eligible assets held by the bank by its NDTL and multiplying the result by 100.

Current Ratio

The current ratio is the simplest liquidity ratio to calculate and interpret. Anyone can easily find the current assets and current liabilities line items on a company's balance sheet. Divide current assets by current liabilities, and you will arrive at the current ratio.

The Fed excluded Treasuries and reserve deposits from the 5% minimum supplementary leverage ratio (SLR) – a banking organization's Tier 1 capital relative to its total leverage exposure (TLE) – to stimulate credit and other business activity.

What is a good liquidity coverage ratio? ›

What Is a Good LCR? Experts say that a bank should have an LCR ratio of 1:1, but this is difficult to achieve and set as it requires a bank to keep enough liquid assets or cash at any one time for the next thirty days. As such, the Financial Stability Board (FSB) recommends having a liquidity coverage ratio of 100%.

SLR analysis explores the linear association between an explanatory (independent) variable, usually denoted as x, and a response (dependent) variable, usually denoted as y • This type of data is called bivariate data (data with two (bi) variables) • The point is to see if we can use a mathematical linear model to ...

As of January 29, 2024, the current SLR in India is 18%. It suggests that for every ₹100 of deposits a bank holds, it must maintain at least ₹18 in the form of liquid assets.

Statutory Liquidity Ratio or SLR is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. It is basically the reserve requirement that banks are expected to keep before offering credit to customers.

For example, in the US, the SLR for commercial banks is set by the Federal Reserve. Banks that hold more than $250 billion in overall consolidated assets are required to retain a minimum of 3% SLR (also knowns as supplementary leverage ratio). The SLR is also used as a monetary policy measure.

Standing Deposit Facility (SDF) rate is a rate at which the RBI accepts uncollateralised deposits on an overnight basis, from banks. It is a tool that helps in liquidity management and is placed at 25 basis points below the policy repo rate.

The Reserve Bank of India is authorised to make monetary policy under the Reserve Bank of India Act, 1934 and can set the cash reserve ratio between 3% and 15%. This article will talk about the CRR and objectives of CRR in detail.

What is the current CRR rate? The CRR is among the important components of the RBI's monetary policy. As of 2023, the CRR rate is 4.5%, which has been effective since May 21, 2022.