Chapter 3 Part 2 - Banking

Economics Class 12
Macroeconomics

"It determines

Minimum percentage of deposits which are kept with bank in liquid form"

### Transcript

What is Statutory Liquidity Ratio It is the Ratio of Liquid Cash kept by bank to Total Deposits Liquid cash means cash kept in bank vault(locker) and liquid cash like gold Statutory Liquidity Ratio Cash Reserves of Bank in Vault +Liquid cash as Gold Total Deposits of bank Example 1 Deposits of Bank =100 Cash kept with Bank =20 Gold with Bank=10 SLR =(20-+10)/100= 30% Money Available to give loans 100-20-10=70 Example 2 Deposits of Bank =100 Cash kept with Bank =5 Gold with Bank=10 SLR =(5-+10)/100= 15% Money Available to give loans 100-5-10=85 Higher the SLR, lesser amount is available to bank for loan Lower the SLR , More amount is available to bank for loan What is Vault Cash? It is the amount of cash or currency kept at bank to meet day to day needs Purpose Customer deposits their money in bank account Some of them may want their money back For this purpose ,certain amount of Currency notes and coins are kept in a storage space called Vault Note Amount kept depends upon Statutory Liquidity Ratio Higher the SLR, more amount kept in vault and less available to give as loan