Government likely to increase SLR by 500 bps

February 20, 2023 (MLN): In a move to regulate the money supply, control inflation, maintain financial stability, and promote Islamic banking, the government is set to increase the Statutory Liquidity Ratio (SLR) for Islamic banking institutions by 500 basis points (bps).

According to sources familiar with the matter, the new SLR is expected to be around 19%, which is higher than the current SLR of 14%.

For the unversed, the SLR is a percentage of deposits that banks are required to maintain in the form of liquid assets such as cash, gold, or government securities.

This move is aimed at ensuring that Islamic banks have enough liquid assets to cover any sudden liquidity crunches, promote the growth of Islamic banking in the country and provide a more level playing field for Islamic banks compared to conventional banks.

Islamic banking has been growing rapidly in recent years, with an increasing number of consumers opting for Shariah-compliant banking products.

Sources indicate that the notification to increase the SLR is expected to be released within a week.

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