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India-RBI

SLR, CRR & the Liquidity Adjustment Framework

228 notifications govern SLR and investment classification. 213 govern CRR. 595 govern the LAF/Repo/MSF/SDF corridor that sits on top of these structural tools.

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The Statutory Liquidity Ratio and the Cash Reserve Ratio are the two oldest tools in the RBI's monetary policy arsenal — predating the repo rate, the LAF, and the entire modern liquidity management framework. SLR forces banks to hold government securities, creating captive demand for sovereign debt. CRR forces banks to park cash with the RBI, directly absorbing liquidity from the system. Between them, they determine how much of a bank's deposits are available for actual lending — and by extension, how much credit flows to the economy.

228 notifications govern SLR and investment classification. 213 govern CRR. 595 govern the LAF/Repo/MSF/SDF corridor that sits on top of these structural tools.

See also: Government Securities & Money Market | The Interest Rate Chain

For the narrative version, see What SLR and CRR Actually Do

Written by Sushant Shukla
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