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STATUTORY LIQUIDITY RATIO [SLR]

STATUTORY LIQUIDITY RATIO [SLR]

SLR stands for Statutory Liquidity Ratio. The Central bank of the country made a  statutory liquid ratio  to be maintained by each bank at the close of each business day. Statutory liquidity ratio shall be made by each bank in the form of cash, gold or unencumbered approved securities at the close of business on any day be less than such percentage of the total of its demand and time liabilities as the Central Bank may specify from time to time.

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. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR).


CASH RESERVE RATIO [CRR]
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Cash Reserve Ratio [CRR]

The banks are required to keep only a fraction of their deposit liabilities in the form of liquid cash with the Central bank of the country for ensuring the safety and liquidity of deposits.  This method is called "fractional reserve baking system".
The CRR (Cash Reserve ratio refers the liquid cash the scheduled banks have to maintain with the Central Bank of the country (main bank) as a percentage of their demand and time liabilities.

Eg:. CRR is 10% then a bank with net demand and time deposits of KD 1,000,000.000 will have to deposit 100,000.000 with Central bank of Kuwait as liquid cash.

 


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Cash Reserve Ratio - CRR, Statutory Liquidity Ratio, SLR



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