What changed
The SLR requirement for scheduled commercial banks was reduced from 24% to 23% of net demand and time liabilities (NDTL), effective from the fortnight starting August 11, 2012. This change was announced in the First Quarter Review of the Monetary Policy 2012-13 on July 31, 2012, and supersedes the earlier SLR notification of December 16, 2010.
What it means for you
Banks will now need to hold 1% less of their NDTL in approved securities (SLR assets), releasing additional liquidity into the system. This additional liquidity can be deployed for credit expansion or investments, potentially lowering lending rates and supporting economic growth. However, banks must ensure compliance with the new 23% floor on a daily basis from the effective date.
What you must do
- Recalibrate your SLR portfolio to ensure daily holdings are at least 23% of NDTL from August 11, 2012.
- Update internal systems and reporting templates to reflect the revised SLR threshold.
- Assess the freed-up liquidity for deployment in priority sector lending or other assets.
- Communicate the change to treasury and compliance teams for smooth transition.
Who it affects
All scheduled commercial banks (excluding Regional Rural Banks), Treasury and asset-liability management (ALM) desks, Compliance and risk management departments
What is the effective date for the new SLR of 23%?
The reduced SLR of 23% applies from the fortnight beginning August 11, 2012, as per the RBI notification dated July 31, 2012.
Does this SLR reduction apply to Regional Rural Banks?
No, the circular explicitly excludes Regional Rural Banks from this change.
What is the legal basis for this SLR change?
The change is made under sub-section (2A) of Section 24 of the Banking Regulation Act, 1949, and modifies the earlier SLR notification of December 16, 2010.