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Banking Awareness is considered to be the high scoring section in any competitive exam. It includes two main portions, current affairs GK and static GK. In this article, we will discuss some really important Banking Awareness topics that are covered in almost all competitive exams. Also, you can download the PDF of lists of different Banking Awareness topics.
In Banking Section, the questions are asked from following topics: History of Banking, banking terms, Marketing of Banking Products, Functions of Banks, Banks and their taglines, schemes, committees related to banking, headquarters of bank, some Banking news related, apps launched by banks, new schemes etc.
In a series of sharing useful study material for upcoming banking exams. Here, we are providing Banking Awareness notes for all banking Exams (IBPS, SBI & Other Banking Exams).
Statutory Liquidity Ratio(SLR) : Banking Awareness Study Notes
Statutory Liquidity Ratio (SLR) is the govt term for the reserve demand that commercial banks are required to maintain in the form of cash, gold reserves, Reserve Bank of India (RBI) approved securities before giving credit to the customers. It is directed under Section 24 of the Banking Regulation Act, 1949. The SLR is determined by the RBI. It is usually used to control inflation and fuel growth, by increasing and decreasing the money supply. It controls the credit growth in India. The maximum limit of SLR is 40% and the minimum limit of SLR is 0 In India, the RBI always decides the percentage of SLR. If the bank fails to control the required level of the statutory liquidity ratio, then it becomes responsible to pay penalty to Reserve Bank of India (RBI).
What happens if SLR is not maintained?
In India, every bank – scheduled commercial bank, state cooperative bank, central cooperative banks, and primary co-operative banks – is required to maintain the SLR as per the RBI guidelines. For computation and maintenance of SLR, banks have to report their latest net demand and time liabilities to RBI every fortnight (Friday).
If any commercial bank fails to maintain the SLR, RBI will levy a 3% penalty annually over the bank rate. Defaulting on the next working day too will lead to a 5% fine. This will ensure that commercial banks do not fail to have ready cash available when customers demand them.
How does Statutory Liquidity Ratio work?
Every bank must have a specified portion of their Net Demand and Time Liabilities (NDTL) in the form of cash, gold, or other liquid assets by the day’s end. The ratio of these liquid assets to the demand and time liabilities is called the Statutory Liquidity Ratio (SLR). The Reserve Bank of India 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.
RBI is also responsible for regulating the flow of money and stability of prices to run the Indian economy. Statutory Liquidity Ratio is one of its many monetary policies for the same. SLR (among other tools) is instrumental in ensuring the solvency of the banks and cash flow in the economy.
