<P> There are some statutory requirements for temporarily placing the money in government bonds . Following this requirement, Reserve Bank of India fixes the level of SLR . 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 . </P> <P> The SLR is fixed for a number of reasons . The chief driving force is increasing or decreasing liquidity which can result in a desired outcome . A few uses of mandating SLR are: </P> <Ul> <Li> Controlling the expansion of bank credit . By changing the level of SLR, the Reserve Bank of India can increase or decrease bank credit expansion . </Li> <Li> Ensuring the solvency of commercial banks </Li> <Li> 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 . </Li> <Li> Compelling the commercial banks to invest in government securities like government bonds </Li> </Ul> <Li> Controlling the expansion of bank credit . By changing the level of SLR, the Reserve Bank of India can increase or decrease bank credit expansion . </Li>

What is the full form of slr in banking