1. Home
  2.  |  
  3. Economy Current Affairs  |  

RBI Further relaxed SLR to provide More Funds to Banks for Lending

Aug 21, 2013 13:14 IST

The Reserve Bank of India (RBI) on 20 August 2013 further relaxed the Statutory Liquidity Ratio (SLR) to provide more funds to banks for lending. This was in view of the losses suffered by banks in their investment portfolio. Revising its earlier limit, asking banks to reduce their hold-to-maturity bond holdings gradually to 23 per cent of deposits, RBI has now allowed banks to retain those holdings at 24.5 percent.

To further ease rupee volatility, RBI will conduct open market operations of long dated government securities worth 8000 crore rupees on 23 August 2013. RBI stated that depending on evolving market conditions, it will thereafter decide on the amount and frequency of OMOs (Open Market operations).

What is SLR?  
SLR stands for Statutory Liquidity Ratio. This term is used by bankers and indicates the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities. In other words, it is ratio of cash and some other approved securities to liabilities (deposits). It regulates the credit growth in India.

The main objectives for maintaining the SLR ratio are as following:
• To control the expansion of bank credit. By changing the level of SLR, the Reserve Bank of India can increase or decrease bank credit expansion.

• To ensure the solvency of commercial banks.

• To compel the commercial banks to invest in government securities like government bonds.

If any Indian bank fails to maintain the required level of Statutory Liquidity Ratio, then it becomes liable to pay penalty to Reserve Bank of India.

Is this article important for exams ? Yes198 People Agreed
Read more Current Affairs on: RBI , SLR , Liquidity

Latest Videos

Register to get FREE updates

    All Fields Mandatory
  • (Ex:9123456789)
  • Please Select Your Interest
  • Please specify

  • ajax-loader
  • A verifcation code has been sent to
    your mobile number

    Please enter the verification code below

This website uses cookie or similar technologies, to enhance your browsing experience and provide personalised recommendations. By continuing to use our website, you agree to our Privacy Policy and Cookie Policy. OK