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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. The SLR is fixed by the RBI and is a form of control over the credit growth in India.
The government uses the SLR to regulate inflation and fuel growth. Increasing the SLR will control inflation in the economy while decreasing the statutory liquidity rate will cause growth in the economy. The SLR was prescribed by Section 24 (2A) of Banking Regulation Act, 1949.
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Yogita Ingle 5 years, 9 months ago
Credit creation separates a bank from other financial institutions. In simple terms, credit creation is the expansion of deposits. And, banks can expand their demand deposits as a multiple of their cash reserves because demand deposits serve as the principal medium of exchange.
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Nikita Jain 5 years, 9 months ago
1Thank You