Banking and monetary regulator, Reserve Bank of India has declared a dip in the statutory liquidity ratio (SLR) to 24% for regional rural banks (RRBs). SLR refers to the amount that has to be kept by lenders in government deposits, cash or gold.
The new SLR reduced by 1% for RRBs has been brought into effect from December 18.
"It has been decided to reduce the SLR for RRBs from 25 per cent of their Net Demand and Time Liabilities (NDTL) to 24 per cent with effect from December 18," RBI said in a notification.
With reduction in SLR, RRBs can keep more of their funds for credit purposes and less needs to be deposited in securities.
"We expect the government to spend and reduce the cash balance and ease the liquidity position. Although the government is spending, it is not enough," RBI Governor D Subbarao had said recently.
RBI had said that high cash balance with government is also causing a strain in liquidity.