NON SLR INVESTMENTS BY INDIAN BANKS AN EMPIRICAL STUDY OF PUBLIC AND PRIVATE SECTOR BANKS
NON SLR INVESTMENTS BY INDIAN BANKS AN EMPIRICAL STUDY OF PUBLIC AND PRIVATE SECTOR BANKS

Summary/Abstract: Banks raise money in the form of deposits, capital and external liabilities and deploy these in banking assets for gainful purpose, in lending and investment operations. The objective of making these investments is to comply with statutory exposure, diversification of risk, providing liquidity when so required and finally availing of profitable opportunities in the market. The return which banks get on advances is more than that in investment portfolio in case of Indian banks, though operating cost for investment function is much less. Banks have to keep a specified percentage in designated securities, known as Statutory Liquidity Ratio (SLR). Apart from this mandatory exposure, banks also make non SLR investmentsin various kinds of instruments. Such non SLR investments are regulated as per guidelines issued by Reserve Bank of India (RBI) and disclosed in respective annual reports of the banks. These disclosures indicate the risk element inherent therein and soundness of decision taken by bank in such exposure. This paper examines various nuances of non SLR investments made by public and private sector banks in India.

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