Question: How SLR Is Maintained By Banks?

Can SLR be maintained in cash?

SLR has to be maintained in the form of gold, cash or approved securities notified by RBI such as central and state government bonds.

3.

SLR is held in approved assets and is not available to the bank for making loans or investing in securities markets or other bonds..

What is the purpose of SLR?

Objectives of SLR 1) One of the main objectives is to prevent commercial banks from liquidating their liquid assets when the RBI raises the CRR. 2) SLR is used by the RBI to control credit flow in the banks. 3) In a way, SLR also makes commercial banks invest in government securities.

What is the current SLR?

Current Key RatesDateRepo RateSLRAug 20195.4%19.5%June 20195.75%19.5%Apr 20196%19.5%Feb 20196.25%19.5%21 more rows•May 21, 2020

Who keeps SLR?

1. ASSETS ELIGIBLE UNDER SLR. The eligible assets for SLR mainly include cash, gold and approved securities by the RBI. Most banks keep the SLR in the form of government approved securities specifically – central government bonds and treasury bills as they give a reasonable return.

What is SLR example?

This minimum percentage is called Statutory Liquidity Ratio. Example: If you deposit Rs. 100/- in bank, CRR being 9% and SLR being 11%, then bank can use 100-9-11= Rs.

What is CRR and SLR in banking?

CRR or cash reserve ratio is the minimum proportion / percentage of a bank’s deposits to be held in the form of cash. … SLR or statutory liquidity ratio is the minimum percentage of deposits that a bank has to maintain in form of gold, cash or other approved securities.

What is included in SLR?

The eligible assets for SLR mainly include cash, gold and approved securities by the RBI. Most banks keep the SLR in the form of approved securities specifically –central government bonds and treasury bills as they give a reasonable return.

Which banks maintain CRR and SLR?

The Central Bank controls the liquidity in the Banking system with CRR. In the case of SLR, the securities are kept with the banks themselves, which they need to maintain in the form of liquid assets. In CRR, the cash reserve is maintained by the banks with the Reserve Bank of India.

Does bank earn interest on SLR?

Banks can’t lend that money to corporates or individual borrowers or use it for investment purposes. Banks also don’t earn anything on the money held in that account. … Unlike CRR, money invested under the SLR window earn some interests for banks. But they can’t access this fund for lending purposes.

What is SLR in banking system?

In India, the Statutory liquidity ratio (SLR) is the Government term for the reserve requirement that commercial banks are required to maintain in the form of 1. cash, 2. gold reserves,3.

What happens if SLR increases?

Impact of SLR If the SLR increases, it restricts the bank’s lending capacity and helps in controlling the inflation by soaking the liquidity from the market. Consequently, banks will have less money available to lend, and they will charge higher interest rates on loans to keep up with their profit margin.

Does RRB need to maintain CRR and SLR?

Other banks in India are directly regulated by RBI. … Regional Rural Banks Act, 1976. Statutory pre-emptions – RRBs need not maintain CRR (Cash Reserve Ratio) & SLR (Statutory liquidity ratio) like any other banks.

Do cooperative banks maintain CRR and SLR?

1.1 All primary (urban) co-operative banks (UCBs) (scheduled as well as non-scheduled) are required to maintain stipulated level of cash reserve ratio (CRR) and statutory liquidity ratio (SLR). … However, it may be noted that Scheduled UCBs are required to compute CRR requirements as per Section 42 of RBI Act, 1934.

Who decides CRR and SLR?

SLR, or statutory liquidity ratio, determines the amount of money a bank needs to invest in certain specified securities, which are predominantly securities issued by the central government and state governments. RBI fixes this limit. Unlike CRR, money invested under the SLR window earn some interests for banks.

Why CRR and SLR are maintained by banks?

In the case of CRR, the bank is mandated to have some cash reserve with the RBI. … This ratio is used by the RBI to control the bank’s leverage for credit expansion. CRR is issued by the central bank to control the liquidity in the market. The SLR makes the bank keep the reserve with themselves.