SLR stands for Statutory Liquidity Ratio. It is the amount of funds that a bank is required to maintain in the form of cash, gold, and other securities before giving credit. SLR is a monetary policy tool used by the Reserve Bank of India (RBI) to regulate the credit flow in the economy.

Under the SLR, banks are required to maintain a certain percentage of their net demand and time liabilities (NDTL) in the form of liquid assets. NDTL refers to the total deposits of a bank that are payable on demand or within a specified time frame.

The SLR is currently set at 18% of NDTL. This means that for every Rs. 100 that a bank receives as deposits, it is required to maintain Rs. 18 as liquid assets.

The purpose of SLR is to ensure that banks have sufficient funds to meet the demands of depositors and to maintain financial stability in the economy. By requiring banks to maintain a certain level of liquid assets, the RBI is able to control the amount of credit that banks can extend to borrowers.

If the RBI increases the SLR, banks will have to maintain a higher percentage of liquid assets, which will reduce the amount of credit they can extend to borrowers. On the other hand, if the RBI decreases the SLR, banks will have to maintain a lower percentage of liquid assets, which will increase the amount of credit they can extend to borrowers.

In summary, the SLR is an important monetary policy tool used by the RBI to regulate the credit flow in the economy and maintain financial stability.