<\/span><\/h2>\n\n\n\nSLR is the minimum percentage of a bank’s deposit base, or Net Demand and Time Liabilities (NDTL), that has to be parked in liquid assets before it can lend out the rest. These assets include cash, gold, and government securities that get the RBI’s stamp of approval, both central and state. Unlike the Cash Reserve Ratio (CRR), where funds just sit idle with the RBI not earning anything from them, SLR investments actually earn returns for banks, and they still manage to serve the regulator’s dual purposes: keeping banks solvent and ensuring there’s a steady appetite for government borrowing.<\/p>\n\n\n\n
The RBI’s got the power to set SLR as high as 40%, but in reality, it’s been on a downward trend over the years\u2014from a high of 38.5% back in 1990 to 18% today, which is where it’s been stuck since the COVID-era cut in April 2020.\u00a0<\/p>\n\n\n\n
Here\u2019s a quick example: Imagine a bank sitting on \u20b910,000 crore in deposits. Now, with an 18% SLR, they’re required to set aside \u20b91,800 crore in approved liquid assets, which mostly means G-Secs. Scale that up to the entire Indian banking system, where deposits reach hundreds of lakh crores, and you’ve got a massive, virtually guaranteed pool of demand for government bonds just waiting to happen. It’s this mechanism that actually connects the dots between a banking ratio that might seem dry and the real-time pricing of bonds.<\/p>\n\n\n\n