What changed
RBI removed the exemption that allowed scheduled UCBs to exclude CBLO liabilities from CRR computation. Effective from the fortnight starting November 21, 2009, liabilities from CBLO transactions with CCIL must be included in NDTL for CRR purposes. The base for the first computation is the reporting Friday of November 6, 2009.
What it means for you
Scheduled UCBs will now need to set aside more cash reserves if they have CBLO borrowings, tightening their liquidity. This aligns UCBs with the broader monetary policy stance and reduces arbitrage between CBLO and other funding sources. Banks must recalibrate their NDTL calculations and ensure adequate CRR compliance from the specified fortnight.
What you must do
- Update your CRR computation process to include liabilities from CBLO transactions with CCIL from the fortnight beginning November 21, 2009.
- Use the reporting Friday of November 6, 2009 as the base for the first revised NDTL calculation.
- Ensure only inter-bank liabilities (as per Section 42(1) explanation clause d) and ACU US$ credit balances are exempted from NDTL.
- Review your CBLO exposure and liquidity position to manage the increased CRR requirement.
Who it affects
Scheduled Primary (Urban) Co-operative Banks, Treasury and ALM teams at UCBs, Compliance departments handling CRR reporting
When does the new CRR requirement on CBLO liabilities take effect?
It takes effect from the fortnight beginning November 21, 2009, with the base NDTL computed as of the reporting Friday of November 6, 2009.
Are all liabilities still exempt from CRR for UCBs?
No. Only liabilities to the banking system (as defined in Section 42(1) explanation clause d) and credit balances in ACU US$ accounts remain exempt. CBLO liabilities are no longer exempt.
Does this circular apply to all urban co-operative banks?
It applies specifically to scheduled Primary (Urban) Co-operative Banks, as addressed in the circular.