Statutory liquidity ratio (SLR) is the Indian government term for reserve requirement that the commercial banks in India require to maintain in the form of gold, government approved securities before providing credit to the customers. Statutory Liquidity Ratio is determined by Reserve Bank of India maintained by banks in order to control the expansion of bank credit.

A few uses of mandating SLR are:

1) Controlling the expansion of bank credit. By changing the level of SLR, the Reserve Bank of India can increase or decrease bank credit expansion.

2) Ensuring the solvency of commercial banks.

3) By reducing the level of SLR, the RBI can increase liquidity with the commercial banks, resulting in increased investment. This is done to fuel growth and demand.

4) Compelling the commercial banks to invest in government securities like government bonds.