Statutory Liquidity RatioSLR
The slice of deposits a bank must hold in government bonds instead of lending out.
Why you care
SLR is why a big pile of the balance sheet sits in bonds, not loans. Unlike CRR, it isn't dead money — it earns the G-sec yield — but that yield is lower than a loan's, so it still drags on profitability. Treasury and ops staff field this constantly.
Run the numbers
At 18% SLR, ₹180 cr of every ₹1,000 cr goes into G-secs (illustrative). Combined with CRR, ~₹210 cr is locked before any customer lending — over a fifth of the balance sheet, pre-allocated.
Where this goes
SLR sits alongside CRR as the second regulatory lock on deposits, and these G-secs are a major line on the asset side of the balance sheet. Both are tools RBI uses with the repo rate to manage liquidity.
Why you care
The Statutory Liquidity Ratio (SLR) is the slice of deposits a bank must hold in safe, liquid assets — overwhelmingly government securities (G-secs) — rather than lend to customers.
Unlike CRR, SLR isn't dead money — it earns the G-sec yield. But that yield is lower than what a loan would earn, so SLR still drags on profitability. You're forced to be a lender to the government before you're allowed to be a lender to customers. SLR also quietly makes banks the biggest buyers of government debt in India, which is why "bank treasury" is a real and important desk. For ops and treasury staff, SLR is why a large pile of the balance sheet sits in bonds, not loans — and why rising interest rates can cause mark-to-market pain on those bonds.
Run the numbers
Suppose SLR is 18% and your bank has ₹1,000 crore of deposits.
- Required G-sec holding: 18% × ₹1,000 cr = ₹180 cr in government bonds.
- Those G-secs earn, say, ~7% — better than CRR's 0%, but less than the ~9% a loan earns.
- Combined with the ₹30 cr CRR, that's ₹210 cr of every ₹1,000 cr locked away by regulation before any customer lending happens.
So out of ₹1,000 cr of deposits, only ~₹775 cr is freely lendable. The regulator's grip is literal: nearly a quarter of the balance sheet is pre-allocated.
Where this goes
SLR sits alongside CRR as the second regulatory lock on your deposits, and these G-secs are a major line on the asset side of the balance sheet. Both are tools the RBI uses with the repo rate to manage liquidity and the bond market. The bond book these G-secs sit in is also where rate moves become treasury gains or losses.