LCR steals SLR's thunder: India adopts a modern measure of bank liquidity

The decades' old method of impounding bank deposits is making way for a more robust system

The Reserve Bank of India’s (RBI) decision to bring down the statutory liquidity ratio (SLR) by 25 basis points to 18 per cent from 19.5 per cent as on date would have normally made for screaming headlines, but it did not. Why so?

It’s because the SLR - the share of deposits maintained in bonds - is an old concept almost unique to India now and kept alive to help fund the Centre’s deficit. The international standard for measuring the liquidity of a bank is the liquidity coverage ratio (LCR). 

Effective January 2019, the LCR is to be minimum 100