Under Section 24 and Section 56 of the Banking Regulation Act, 1949, every Scheduled Commercial Banks (Including Regional Rural Banks), Local Area Banks, Small Finance Banks and Payments Banks in India are required to maintain in the form of cash, or gold or unencumbered investment in any of the following instruments (“SLR securities”)], namely:- (i) Dated securities of the Government of India issued from time to time under the Market Borrowing Programme and the Market Stabilization Scheme ; or (ii) Treasury Bills of the Government of India; or (iii) State Development Loans (SDLs) of the State Governments issued from time to time under the market borrowing programme. The maintaining of above liquid reserve by the commercial banks at the rate fixed by RBI. The ratio of these liquid assets to the demand and time liabilities is called as the Statutory Liquidity Ratio. is called Statutory Liquidity Ratio regulation.
RBI approved securities before providing credit to the customers. Statutory liquidity ratio is determined by Reserve Bank of India maintained by banks in order to control the expansion
The SLR securities such as (i) Dated securities of the Government of India issued from time to time under the Market Borrowing Programme and the Market Stabilization Scheme ; or (ii) Treasury Bills of the Government of India; or (iii) State Development Loans (SDLs) of the State Governments issued from time to time under the market borrowing programme that have been acquired from the Reserve Bank under reverse repo, shall be included as SLR securities for the purpose of maintenance of SLR assets.
However, the securities lodged with another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of; or securities offered as collateral to the Reserve Bank for availing liquidity assistance under Marginal Standing Facility (MSF), up to the permissible percentage of the total NDTL in India, carved out of the required SLR portfolio of the bank concerned; and securities offered as collateral to the Reserve Bank for availing liquidity assistance under Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) shall not be treated as SLR securities for the purpose of maintenance of SLR assets.
In the Statement on Developmental and Regulatory Policies on December 05, 2018, Reserve Bank of India announced that the SLR requirement of banks to be reduced by 25 basis points every calendar quarter from 19.50 per cent of their Net Demand and Time Liabilities (NDTL) to
(i) 19.25 per cent from January 5, 2019
(ii) 19.00 per cent from April 13, 2019
(iii) 18.75 per cent from July 6, 2019
(iv) 18.50 per cent from October 12, 2019
(v) 18.25 per cent from January 4, 2020
(vi) 18.00 per cent from April 11, 2020
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