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SLR

What is SLR (Statutory Liquidity Ratio)? How does SLR regulate money supply?

What is SLR (Statutory Liquidity Ratio)?

slr

SLR (Statutory Liquidity Ratio) is ratio of total bank deposits or a portion of the banks’ NDTL (Net Demand and Time Liabilities), that the banks are required to invest in assets specified by the Central Bank of the country (in India, RBI is the central bank). In other words, we can say under SLR, the banks are required to invest a certain percentage of the total bank deposits in gold, and government bonds and securities. RBI (Reserve Bank of India) uses SLR as an instrument to strengthen banks to meet any unexpected demand from depositors at short notice by selling the bonds.

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