What changed
Previously, non-scheduled Tier-I UCBs could hold up to 15% of NDTL in interest-bearing deposits with SBI, its subsidiaries, public sector banks, or IDBI instead of government/approved securities for SLR. Now, from October 1, 2009, this exemption is reduced to 7.5% of NDTL, and from April 1, 2010, it is completely withdrawn.
What it means for you
UCBs will need to gradually increase their holdings of government/approved securities to meet full SLR requirements by April 2010. This may impact liquidity management and investment strategies, as banks must shift from simple deposits to marketable securities. The phase-out gives time to adjust portfolios but requires proactive planning.
What you must do
- Review current SLR compliance and identify the gap between existing exemptions and new limits.
- Plan to reduce reliance on interest-bearing deposits with SBI/subsidiaries/public sector banks/IDBI for SLR purposes.
- Increase investments in government/approved securities to meet the full SLR requirement by April 1, 2010.
- Monitor the transition timeline: 7.5% exemption from Oct 1, 2009, and zero exemption from Apr 1, 2010.
- Acknowledge receipt of this circular to your respective RBI Regional Office.
Who it affects
Non-scheduled Tier-I Primary (Urban) Co-operative Banks, All Primary (Urban) Co-operative Banks using the SLR exemption
What was the earlier SLR exemption for non-scheduled Tier-I UCBs?
They were exempt from maintaining SLR in government/approved securities up to 15% of NDTL, provided the amount was held in interest-bearing deposits with SBI, its subsidiaries, public sector banks, or IDBI.
When does the full withdrawal of the exemption take effect?
The exemption is completely withdrawn from April 1, 2010. Between October 1, 2009 and March 31, 2010, the exemption is limited to 7.5% of NDTL.
What should UCBs do to prepare for the withdrawal?
UCBs should gradually shift their SLR-eligible assets from interest-bearing deposits to government/approved securities, ensuring full compliance by April 1, 2010.