Every bank is required to maintain at the close of business
every day, a minimum proportion of their Net Demand and Time Liabilities as
liquid assets in the form of cash, gold and un-encumbered approved securities. In
short it indicates the minimum
percentage of deposits that the bank has to maintain in form of gold, cash or
other approved securities.
The ratio of liquid assets to demand and time liabilities is
known as Statutory Liquidity Ratio (SLR).
An increase in SLR also restrict
the bank’s leverage position to pump more money into the economy.
