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October 04, 2017

RBI decided to reduce the Statutory Liquidity Ratio (SLR) requirement of banks from 20.0% of their Net Demand and Time Liabilities (NDTL) to 19.5% from the fortnight commencing October 14, 2017. Banks are currently permitted to exceed the limit of 25% of the total investments under held-to-maturity (HTM) category, provided the excess comprises of SLR securities and total SLR securities held under HTM category are not more than 20.5% of NDTL.

To align this ceiling on the SLR holdings under HTM category with the mandatory SLR, it has been decided to reduce the ceiling from 20.5% to 19.5% in a phased manner, that is, 20% by December 31, 2017 and 19.5% by March 31, 2018. As per extant instructions, banks may shift investments to/from HTM with the approval of the Board of Directors once a year, and such shifting will normally be allowed at the beginning of the accounting year. To enable banks to shift their excess SLR securities from the HTM category to Available for Sale (AFS)/Held for Trading (HFT) to comply with the instructions provided, it has been decided to allow such shifting of the excess securities and direct sale from HTM category. This would be in addition to the shifting permitted at the beginning of the accounting year, that is, in the month of April. Such transfer to AFS/HFT category as well as sale of securities from HTM category, to the extent required to reduce the SLR securities in HTM category in accordance with the regulatory instructions, would be excluded from the 5% cap prescribed for value of sales and transfers of securities to/from HTM category under paragraph 2.3 (ii) of the Master Circular on Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks.

Keywords: Asia Pacific, India, Banking, Statutory Liquidity Ratio, Liquidity Risk, RBI

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