- The SLR is the portion of deposits that banks are required to maintain in the form of gold or government securities before providing credit to customers.
- It is also the ratio of liquid assets to demand and time liabilities.
- It is determined and maintained by the Reserve Bank of India in order to control the expansion of bank credit.
- It is determined as percentage of total demand and time liabilities. Time Liabilities refer to the liabilities, which the commercial banks are liable to pay to the customers after a certain period mutually agreed upon and demand liabilities are such deposits of the customers which are payable on demand
- If any Indian bank fails to maintain the required level of Statutory Liquidity Ratio, then it becomes liable to pay penalty to Reserve Bank of India. The defaulter bank pays penal interest at the rate of 3% per annum above the Bank Rate, on the shortfall amount for that particular day.