bonds and other Reserve Bank of India (RBI)- approved securities before providing credit to the customers.
[1] SLR is used by bankers and indicates the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities.
However, as most banks currently keep an SLR higher than required (>26%) due to lack of credible lending options, near term reductions are unlikely to increase liquidity and are more symbolic.
Gold and government securities (or gilts) are included along with cash because they are highly liquid and safe assets.
The RBI can increase the SLR to control inflation, suck liquidity out of the market, to tighten the measure to safeguard the customers' money.
In a growing economy banks would like to invest in stock market, not in government securities or gold as the latter would yield less returns.
SLR rate = (liquid assets / (demand + time liabilities)) × 100% This percentage is fixed by the Reserve Bank of India.