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Quantum of SLR cut hinges on fiscal discipline

Emphasis on reducing required statutory liquidity ratio

Though Economic Survey 2014-15 highlights the need to reduce the required statutory liquidity ratio (SLR) for banks to free resources and meet credit demand, much of it will depend on the government’s fiscal discipline. SLR is the proportion of net demand and time liabilities (NDTL) a bank needs to invest in government paper. A reduction in this ratio is fruitful if accompanied by a fall in the government’s market borrowings, as banks are the key buyers of bonds. It is expected in Budget 2015-16, to be presented on Saturday, the government will adhere to a fiscal ...