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What is the SLR (Statutory Liquidity Ratio) and its purpose?
Question
- A. The ratio of a bank's non-performing assets to its total assets
- B. The percentage of a bank's deposits that must be held in the form of liquid assets
- C. The rate at which banks lend to each other
- D. The ratio of a bank's capital to its risk-weighted assets
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correct Answer ( B )
The Statutory liquidity Ratio (SLR) is the percentage of total deposits of a commercial bank that it is required to maintain in liquid assets by law . These assets include gold, cash and government securities . It acts as a safeguard against liquidity crises and promotes financial stability within the banking system . Changes to the SLR, similar to changes in CRR , affect the amount of money banks can lend and indirectly affect credit availability and economic activity .