'Cutting HTM limit will improve liquidity, treasury income'

'Cutting HTM limit will improve liquidity, treasury income' Mumbai: The proposal to reduce the share of held-to-maturity (HTM) bonds in the SLR portfolio of banks is likely to increase liquidity in the interest rate derivative segment along with the scope to improve treasury earnings, according to a bank's treasury head.

Last week, the Reserve Bank had said it was considering a proposal to reduce the limit HTM segment under the SLR (statutory liquidity ratio) portfolio to improve liquidity.

"The proposal is a step in right direction as it will improve liquidity in the system. It will also improve liquidity in the interest rate derivative segment," IDBI Bank treasury head NS Venkatesh told PTI here.

This is the right time to implement the proposal as interest rates are likely to fall, he said.

On the impact on treasury income, Venkatesh said if implemented, the measure would give banks scope to increase their treasury earnings as some securities would be available for trading.

The limit for holding securities under HTM category is fixed at 25 percent, which is usually aligned with SLR, which at present stands at 23 percent.

Another public sector bank official said the proposal will take some time for implementation as the central bank will discuss it with all stakeholders.

PTI