Slr and Its Significance Essay

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"Has Statutory Liquidity Ratio (SLR) outlived its utility?" 1. INTRODUCTION: i. Importance of SLR Policy Statutory Liquidity Ratio (SLR) is the rate by which monetary authority of a country- theReserve Bank of India controls the supply of money in the economy by exercising its control over interest rates in order to maintain price stability and achieve high economic growth. SLR monetary policy operates on monetary magnitudes such as money supply, interest rates and availability of credit aimed to maintainPrice Stability, Stable exchange rate, Controlled Expansion Of Bank Credit, Healthy Balance of Payment, Financial stability and Economic growth. ii. Rationale for selecting the SLR Policy SLR as a monetary policy instrument has experienced multiple changes in India. Past data showed that reduction in SLR produced positive impact on bank credit and investment. In recent times, changes in SLR helped to reduce inflation to some extent. The SLR for scheduled banks is used mainly in situations of drastic imbalance resulting from major shocks. The effectiveness of SLR in bringing about desired outcomes however depends on adjustments of other indirect monetary policy instruments like the Repo and Reverse Repo rates. In this report, we try to highlight the impact on the overall economy if SLR is completely done away with. The report discusses the advantages and disadvantages of taking this step from the different perspective. The report broadly covers the below topics: • Genesis of SLR monetary policy • Impact of the SLR • Pros and Cons of the SLR • Recommendations for enhancement iii. The Methodology employed in analyzing the policy The policy analysis was done by defining the problem and evaluation criteria; identify all alternatives; evaluate them; and recommend the best policy agenda.We went through the public policy determined by Reserve Bank of

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