Statutory liquidity ratio or SLR is the minimum deposit percentage a commercial bank must have in the form of cash, gold, or other securities. It's actually a reserve obligation banks are expected to hold before granting credit to customers.
The Statutory Liquidity
Requirement (SLR) is one of the quantitative and powerful tools of monetary
control of the central banks. Changes in SLR can have a marked effect on the money
and credit situation of a country. If the central bank raises the average
reserve requirement of commercial banks, this would create a reserve deficiency
or decrease in the available reserve of depository institutions. If the banks
are unable to secure new reserves, they would be forced to contract both
earnings and deposits which would result in a decline in the availability of
credit and increase the market interest rates. The reverse would happen if the
central bank lowers its reserve requirements
As per BB DOS Circular
No.-01, dated 19.01.2014, every scheduled bank has to maintain assets in cash
or gold or in the form of un-encumbered approved securities the market value of
which shall not be less than such portion of its total demand and time
liabilities as prescribed by BB from time to time. BB may also prescribe the
procedure of determination of assets and liabilities and percentages of
maintainable assets in different classes.
At present, the
required SLR is 13% daily for conventional banks and 5.5% daily for Islamic Shari'ah-based
banks and Islamic Shari'ah-based banking or conventional banks of their average
total demand and time liabilities. Banks are advised to follow the circular
issued by the Monetary Policy Department of BB from time to time in this
regard. The SLR is fixed for the below-mentioned reasons:
· Monitor bank credit growth.
· Guarantee the solvency of commercial banks.
· Force banks to buy government bonds and other securities.
· Stimulate demand and growth; this is done by lowering the SLR to provide liquidity in commercial banks.
If a bank fails to
maintain the prescribed SLR, it is liable to pay a penalty to the Bangladesh
Bank Penalty will be charged at the prevailing Special Repo Rate on the amount
by which the SLR falls short daily.
(i) Components eligible for calculation of Statutory
Liquidity Reserve: The eligible components for maintaining Statutory
Liquidity Reserve are cash in tills (both local and foreign currency), gold,
daily excess reserve (excess of Cash Reserve) maintained with BB. balance
maintained with the agent bank of BB and un-encumbered approved securities,
credit balance in Foreign Currency Clearing Account maintained with BB.
Daily
excess of Cash Reserve (if any) will be calculated using the following formula:
Daily excess of Cash Reserve (Day-end balance of unencumbered cash maintained
in Taka current accounts with BB-Required cash reserve on a Bi-weekly average
basis). For maintenance of CRR and SLR, demand and time liabilities should
include all on-balance sheet liabilities excluding the items listed below:
Banks are advised to approach BB for any doubt in reckoning a particular liability as demand or time liability for CRR and SLR computation.a) Paid up capital and reserves,
b) Loans taken from BB.
c) Credit Balance in Profit and Loss account
d) Inter-bank items
e) Repo, Special repo, and any kind of liquidity support taken from BB.