RBI slashes HTM bond limit in SLR to 23%
Mumbai: The Reserve Bank on Friday reduced the requirement of holding HTM (held-to-maturity) category bonds in the SLR (statutory liquidity ratio) portfolio for the banks to 23 percent from the existing 25 percent.
As per the central bank, the reduction will be effected by a quarterly reduction to the tune of at least 50 basis points beginning with the quarter ending June 2013.
"The realignment from 25 percent to 23 percent, in line with the recommendations of the working group on government securities and interest rate derivatives markets, would be effected by way of reduction of at least 50 bps every quarter, beginning with the quarter ending June 2013," the RBI said.
Traditionally, the HTM ratio is aligned with the overall SLR holding requirement set by the RBI. But despite the SLR coming down to 23 percent, even as HTM ratio remained at the previously set 25 percent, limiting banks' liquidity.
According to norms issued way back in September 2004, banks are permitted to exceed the limit of 25 percent of total investments under HTM category, provided the excess comprises only of SLR securities and the total SLR securities held in the HTM category is not more than 25 percent of their demand and time liabilities (DTL) as on the last Friday of the second preceding fortnight.
This relaxation was granted taking into account the requirement of maintenance of SLR of 25 percent of DTL under Section 24 of the Banking Regulation Act, 1949 at that time, the RBI said, adding however the SLR requirement has since been brought down to 23 percent of DTL.
Accordingly, the RBI said today, "Banks may exceed the present limit of 25 percent of total investments under the HTM category provided the excess comprises only of SLR securities; and the total SLR securities held in the HTM category is not more than 23 percent of their DTL as on the last Friday of the second preceding fortnight, that is to say in alignment with the current SLR requirement."
The RBI further said detailed guidelines on the same will be issued shortly.
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