The Hindu Business Line : Move to allow RBI to set lower SLR floors

The Union Cabinet on Thursday approved the promulgation of an ordinance to amend the statutory liquidity ratio (SLR) to ensure greater credit flow to industry. To achieve this, the Government intends to empower the Reserve Bank of India to set lower SLR floors from the existing 25 per cent on net demand and time liabilities i.e. deposits.

The move would give more operational flexibility to the RBI in the conduct of monetary policy and also reduce the stipulated bank lending to the Government (done through SLR among other things). Consequently, there will be more credit for industry.

The Union Finance Minister, Mr P. Chidambaram, told reporters that the liquidity would increase and maintained that the Government borrowing would not be affected on account of the promulgation of the ordinance.

The ordinance would amend the Banking Regulation Act 1949. The present provisions in the Banking Regulation Act 1949 have been found to be inadequate in the context of reforms taking place in the financial sector.

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