What changed
RBI relaxed the phased reduction of SLR securities in HTM from 25% to 23% of DTL, allowing banks to retain SLR holdings in HTM at 24.5% of NDTL till further instructions. As a one-time measure, banks can transfer SLR securities from AFS/HFT to HTM at lower of book or market value as of July 15, 2013, by September 30, 2013. Net depreciation on AFS/HFT portfolios can now be distributed in equal instalments over FY 2013-14.
What it means for you
Banks can shield more bonds from MTM volatility by moving them to HTM, reducing immediate P&L hits from yield spikes. The option to spread depreciation over the year eases earnings pressure, but transfers must be at lower of cost or market, locking in losses. This temporary relief helps banks manage capital ratios amid rising yields.
What you must do
- Identify SLR securities in AFS/HFT eligible for transfer to HTM up to 24.5% of NDTL (based on NDTL as on July 26, 2013 applicable for SLR maintenance for August 23, 2013).
- Value these securities as of July 15, 2013; transfer at lower of book or market value by September 30, 2013.
- Provide for any depreciation on transferred securities per Master Circular para 2.3(v).
- For remaining AFS/HFT portfolios, decide whether to distribute net depreciation in equal instalments over FY 2013-14.
- Ensure board approval for the one-time transfer and document compliance with the 5% cap exclusion.
Who it affects
All scheduled commercial banks (excluding RRBs), Treasury and investment departments, Risk management and finance teams
What is the new HTM limit for SLR securities?
Banks can retain SLR securities in HTM up to 24.5% of NDTL, instead of the earlier phased reduction to 23% of DTL. This is effective till further instructions.