What is SLR bond?

Answer 1

Statutory Liquidity Ratio or SLR refers to the amount that all banks require to maintain in cash or in the form of Gold or approved securities. Therefore a SLR bond is a government issued bond, investment in which is treated as liquid under SLR requirements for banks. Often banks prefer investing in some or the other interest yielding security rather than keeping cash. If banks can invest in a bond and still that investment is treated as liquid for meeting the SLR ratio than the bank would invest in such a bond rather than staing uninvetsed. Normally SLR bonds are seen as goverment's instrument to fulfill their financial commitments. As by qualifying a bond as an SLR bond it makes it easier for them to raise money since banks are attracted towards it.