RBI raises SLR by a percentage, other key rates unchanged
New Delhi:
The Reserve Bank on India (RBI) on Tuesday raised the
statutory liquidity ratio (SLR), the portion of deposits that banks are required
to keep in government securities, by 100 basis points to 25 percent. However,
the RBI, kept other key rates and ratios like repo, reverse repo and cash reserve
ratio unchanged. The decision to raise SLR, in the second quarterly review of
the credit policy, is aimed at reducing liquidity and fighting inflationary expectations,
which have started building up, especially in the case of food items. According
to the new credit policy both reverse repo rates and repo rate are unchanged at
3.25 per cent and at 4.75 per cent respectively. According to the RBI, the hike
in the SLR will not impact liquidity. The SLR is the minimum percentage of deposits
that banks have to park in assets like government bonds. The banking sector feels
that a hike in SLR signals some degree of monetary tightening in the future. But
for now, the RBI would focus on supporting the growth process. The SLR has historically
been at 25 percent and banks are currently holding bonds beyond this limit.
