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SLR Reduced to 23% for Local Area Banks

Current · Source: Reserve Bank of India · RBI/2012-13/229 · issued 28 Sep 2012 · ~1 min read

Quick answerRBI cut the Statutory Liquidity Ratio (SLR) for Local Area Banks from 25% to 23% of NDTL, effective August 11, 2012. This frees up funds for lending or investment.

The rule, in the simplest words

Local Area Banks in India must hold 23% of their Net Demand and Time Liabilities (NDTL) in government-approved securities.
This means they can lend or invest more money, but still meet the statutory minimum.
The change took effect from the fortnight beginning August 11, 2012.

How it plays out — a real example

A treasury officer in Indore, Mr. Kumar, is happy to learn that his bank can now lend more money to customers. With the reduced SLR, the bank can now allocate more funds for gold loans, which will help Mr. Kumar's customers who need urgent financial assistance. He updates the bank's asset-liability management to deploy the freed liquidity optimally and ensures all reporting systems reflect the revised SLR percentage for regulatory submissions.

What changed

The SLR requirement for Local Area Banks was lowered from 25% to 23% of their Net Demand and Time Liabilities (NDTL). The change took effect from the fortnight beginning August 11, 2012, as per a notification dated September 28, 2012.

What it means for you

Local Area Banks now need to hold fewer government-approved securities, releasing liquidity for credit expansion or other investments. This can improve their lending capacity and profitability, but they must still meet the statutory minimum.

What you must do

Update your SLR compliance calculations to reflect the new 23% threshold from August 11, 2012.
Review your asset-liability management to deploy the freed liquidity optimally.
Ensure all reporting systems reflect the revised SLR percentage for regulatory submissions.

Who it affects

All Local Area Banks in India

❓ Common questions

Regulatory timeline

Stated effective date effective August 11, 2012
Decoded by BankPulse 2026-06-18 17:47 IST
partially_modified_by — SLR Reduced to 22.5% from June 14, 2014

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

When did the SLR reduction become effective?

The new SLR of 23% applies from the fortnight beginning August 11, 2012.

What was the previous SLR for Local Area Banks?

The earlier SLR was 25% of NDTL, as per the November 2009 circular.

Does this change affect other bank categories?

No, this circular is specifically for Local Area Banks only.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)

Partially modified by SLR Reduced to 22.5% from June 14, 2014

RBI’s words: “in partial modification of the Notification ... DBOD.No. Ret. BC.47/12.02.001/2012-13 dated September 28, 2012”

📜 Read the original circular — full text as issued by RBI

RBI/2012-13/229

 DBOD.No.Ret.BC.48 /12.02.001/2012-13

 September 28, 2012

 All Local Area Banks

 Dear Sir,

 Section 24 of the Banking Regulation Act, 1949

Maintenance of Statutory Liquidity Ratio (SLR) - Local Area Banks 

 Please refer to our circular DBOD.No.Ret.BC.62/12.02.001/2009-10 dated November 19, 2009 on the captioned subject.

 2. It has been decided that Statutory Liquidity Ratio for Local Area Banks be reduced from 25 per cent to  23 per cent of  their Net Demand and Time Liabilities (NDTL) with effect from the fortnight beginning August 11, 2012.

 3. A copy of the relative notification DBOD.No.Ret.BC.47/12.02.001/2012-13 dated September 28, 2012 is enclosed .

 Yours faithfully,

 (Sujata Lal)

 General Manager

 Encl: 1

 DBOD.No.Ret.BC.47 /12.02.001/2012-13

 September 28, 2012

 Notification

 In exercise of the powers conferred by sub-section (2A) of Section 24 of Banking Regulation Act, 1949 (10 of 1949) as amended from time to time, in partial modification of Notification DBOD.No.Ret.BC.61/12.02.001/2009-10 dated November 19, 2009, the Reserve Bank of India hereby specifies that with effect from the fortnight beginning August 11, 2012, every Local Area Bank shall maintain in India assets as detailed in the Notification DBOD.No.Ret.BC.40/12.02.001/2009-10 dated September 8, 2009 , the value of which shall not at the close of business of any day be less than 23 per cent of the total net demand and time liabilities in India as on the last Friday of the second preceding fortnight.

 (B.Mahapatra)

 Executive Director

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/229 · issued 28 Sep 2012. The plain-English explanation above is BankPulse’s own independent summary.

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Who does what — compliance checklist

💻 IT / Systems

Ensure all reporting systems reflect the revised SLR percentage for regulatory submissions.

📜 Compliance

Update your SLR compliance calculations to reflect the new 23% threshold from August 11, 2012.
Review your asset-liability management to deploy the freed liquidity optimally.

Grouped from the action items above — a single circular may involve more than one team.

Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All Local Area Banks in India), your first concrete step on “SLR Reduced to 23% for Local Area Banks” is: “Update your SLR compliance calculations to reflect the new 23% threshold from August 11, 2012.” (RBI issued this 28 Sep 2012).

Circular: RBI/2012-13/229 -- SLR Reduced to 23% for Local Area Banks
Issued: 28 Sep 2012
Action required: Update your SLR compliance calculations to reflect the new 23% threshold from August 11, 2012.
Action required: Review your asset-liability management to deploy the freed liquidity optimally.
Action required: Ensure all reporting systems reflect the revised SLR percentage for regulatory submissions.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________

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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7596&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.