Question

What is the full form of SLR in the context of economics?
1. Sterilisation Liquidity Ratio
2. Stocks Liquidity Ratio
3. State Liquidity Ratio
4. Statutory Liquidity Ratio

Answer 1

Correct Answer - Option 4 : Statutory Liquidity Ratio

The correct answer is Statutory Liquidity Ratio.

• SLR- Statutory Liquidity Ratio
  • It is a kind of reserve that the commercial banks need to maintain before crediting their money to the borrowers.
  • Regulating the SLR rates is a component of RBI's monetary policy.
  • Reserve Bank of India sets the limit for banks (under Banking Regulation Act, 1949) to hold a certain proportion of their assets as SLR.
  • The following types of assets can be reserved by banks as SLR:
    • Cash or gold (highly liquid assets)
    • RBI approved government securities
    • Any other asset as specified by RBI
  • It is mandatory for all the Scheduled Commercial banks, Central and State cooperative banks, and deposit accepting Non-Banking Financial Companies (NBFCs).
  • NBFCs (which do not accept deposits), Primary Agricultural Credit Society (PACS), and Regional Rural Banks (RRBs) don't fall under the mandate of SLR.