What changed
The temporary 1% SLR relaxation for additional LAF support was made permanent from the fortnight starting November 8, 2008, reducing SLR to 24% of NDTL. A new temporary facility allowed banks to avail up to 1.5% of NDTL as SLR relaxation exclusively for funding NBFCs and MFs, extending the earlier 0.5% limit for MFs to include NBFCs.
What it means for you
Banks get permanent headroom on SLR, freeing up liquidity for lending. The new 1.5% relaxation for NBFCs and MFs helps banks support these sectors without penalty, but must be used only for that purpose and requires a written waiver application.
What you must do
- Apply in writing to RBI for waiver of penal interest on the SLR shortfall up to 1.5% of NDTL arising from availment of this additional liquidity support under LAF for NBFC/MF funding.
- Ensure the SLR relaxation is used exclusively for meeting funding needs of NBFCs and MFs.
- Track the apportionment between NBFCs and MFs flexibly as per business needs.
- Note the permanent SLR reduction to 24% from Nov 8, 2008, and adjust SLR compliance accordingly.
Who it affects
All scheduled commercial banks, NBFCs, Mutual funds
What is the new SLR relaxation for NBFC and MF funding?
Banks can avail additional liquidity support under LAF with SLR relaxation up to 1.5% of NDTL, exclusively for meeting funding needs of NBFCs and MFs.
Do I need to apply for penal interest waiver?
Yes, banks must apply in writing to RBI for waiver of penal interest on the SLR shortfall arising from this facility.
Is the 1% SLR reduction permanent?
Yes, the earlier temporary 1% SLR reduction was made permanent from the fortnight beginning November 8, 2008, bringing SLR to 24% of NDTL.