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RBI all set for the Statutory liquidity ratio (SLR) cut for future planning

Reserve Bank of India has lowered statutory liquidity ratio (SLR) by 50 basis points and told banks to prepare themselves for higher credit growth when the economy picks up.

Governor Raghuram Rajan said that the reduction in SLR might not spur credit growth immediately but it would enable banks to meet credit demand whenever necessary.

“SLR cut is more about planning rather than immediate effect,”

RBI lowered SLR of scheduled commercial banks to 22% of net demand and time liabilities (NDTL) with effect from the fortnight beginning August 9, 2014. SLR is the amount that the commercial banks require to keep in the form of gold or government approved securities before providing credit to the customers. At present banks are required to keep aside 22.5% of their deposits in SLR.He pointed out that improving government finance is creating expectation of an early demand pick up.
RBI said that the regulatory pre-emption such as SLR has been reduced as banks are entering a more competitive environment.

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