BANKING AFFAIRS

Detailed explanation-1: -The SLR was 38.5%, and CRR was 15%. To increase the bank’s productivity rates, the committee recommended reducing these high proportions. Accordingly, they suggested reducing SLR rates from 38.5% to 25% and CRR from 15% to 3-5%.

Detailed explanation-2: -UPSC Mains Notes: The Narasimham Committee had recommended bringing down the statutory pre-emptions such as SLR and CRR. It recommended that SLR should be reduced to 25% over the period of time and CRR should be reduced to 10% over the period of time and CRR should be reduced to 10% over the period of time.

Detailed explanation-3: -Statutory Liquidity Ratio or SLR is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. It is basically the reserve requirement that banks are expected to keep before offering credit to customers.

Detailed explanation-4: -The ratio of these liquid assets to the demand and time liabilities is called the Statutory Liquidity Ratio (SLR). The Reserve Bank of India (RBI) has the authority to increase this ratio by up to 40%. An increase in the ratio constricts the ability of the bank to inject money into the economy.

Detailed explanation-5: -It is computed using the following formula: SLR = [Liquid Assets / (Net Demand + Time Liabilities)] × 100.