myz-vgb.ru A Business Encyclopedia

Statutory Liquidity Ratio

Definition: The Statutory Liquidity Ratio (SLR) refers to the proportion of deposits the commercial bank is required to maintain with them in the form of liquid assets in addition to the cash reserve ratio.

In the definition, the liquid assets are the assets readily convertible into cash, includes government bonds, or government approved securities, gold, and cash reserve. The objective of statutory liquidity ratio is to prevent the commercial banks from liquidating their liquid assets during the time when CRR is raised.

The statutory liquidity ratio is determined by the central bank as the percentage of total demand and time liabilities. The time liabilities refer to the liabilities of a bank which is to be paid to the customer anytime the demand arises and are the deposits of the customers which are to be paid on demand.

The statutory liquidity ratio is determined and maintained by the central bank to control the bank credit, ensure the solvency of commercial banks and compel banks to invest in the government securities.  By changing the SLR, the flow of bank credit in the economy can be increased or decreased. Such as, when the central bank decides to curb the bank credit so as to control the inflation will raise the SLR. On the contrary, when the economy faces recession, and the central bank decides to increase the bank credit will cut down the SLR.

A penalty at a rate of 3% per annum above the bank rate is imposed if any commercial bank fails to maintain the statutory liquidity ratio. Further, a penalty at a rate of 5% per annum above the bank rate is imposed on a defaulter bank if it continues to default on the next working day. The central bank imposes such a restriction on the commercial banks so that the funds are readily made available to the customers on their demand.

Leave a Reply

Your email address will not be published. Required fields are marked *

Shares

Related pages


implicit and explicit cost in economicsteleological ethics examplesexamples of laissez-faire leadership stylehow to calculate inventory turnover ratiomeaning of utilitarian ethicsdefinition of pieceworkexplain the expectancy theory of motivationwhat is the meaning of ulteriorcyclical unemployment defineoligopoly economics definitionwhats jittuckman four stages of group development modelspeculates definitiondefinition of reverse repo rateconsumer utility theoryprimal definethe meaning of ethnocentrismwhistle blow definitionformula of total asset turnover ratiowhat is industrial conflict definitiondisadvantages of long term debtmeaning of inventory turnoverdefine referent powerlaissez faire defineansoff matrix meaningwhat is credit rationingsemantic differential scale definitionpoaching definition environmentdefine disguisedmeaning of irrmeaning of demand pull inflationhow to find profitability indexfactors affecting elasticity of demandto divest meaningstrongly agree likert scaleporters forcesapproaches of collective bargainingsituational variables in leadershipethnocentric polycentric and geocentricjohari modelsfa sales force automationjohari windowcomputerized stock control systemnbfc bankcost push inflation is the result ofansoff growth strategywhat is the meaning of fiscal deficitmeaning of enunciated in hindiemployment provident fundpublicity definition in public relationsfiedler's contingency model of leadershipmeaning of wholesale bankingfixed asset turnover calculatorexamples of convenience sampling in statisticsemployers provident fundtuckmans stages of group developmentcapital budgeting and investment decisionsbenevolent leadership styleguerrilla marketing strategiescontingency models of leadershipwhat is meant by elasticityproduct mix width definitiondemergersmeaning of diagonal communicationlist of elastic and inelastic goodswholesaler channelexplain the concept of quality circleletter of credit investopediastratified sampling strategydefine propoundoperating profit margin ratio formuladebtors to sales ratiodefinition of hrplaw of diminishing utilityheight meaning in telugumanagerial grid theorycyclical unemployedmc gregors theory x and yindifference curves in economicsdelphi techiquemeaning of turnover ratiofive forces model of porter