Floor limit on SLR of banks to be removed

The government has decided in January 2007, to promulgate an ordinance to amend the Banking Regulation Act to enable the Reserve Bank of India (RBI) revise the statutory liquidity ratio (SLR) of banks in special economic zones (SEZs).

Under the proposal, Section 24 of the Banking Regulation Act would be amended to remove the floor limit on SLR (25 per cent currently) while retaining the upper limit at 40 per cent.

SLR requires banks to keep at least certain portion (currently fixed at 25 per cent) of their deposits in liquid assets, mainly government bonds.

Now RBI has the flexibility to go below the SLR, If it decides to do so, to increase the liquidity in the system.

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