What changed
CRR for non-scheduled StCBs and all CCBs increased from 3% to 4% of net demand and time liabilities, aligning with scheduled StCBs. SLR for all StCBs and CCBs reduced from 25% to 22.5% of net demand and time liabilities. Both changes take effect from the fortnight beginning July 12, 2014.
What it means for you
Cooperative banks will need to set aside more cash reserves, tightening liquidity slightly, but the SLR reduction frees up funds for lending or other investments. The interim allowance for term deposits with PSBs to count as SLR until March 31, 2015 gives banks time to adjust their portfolios. From April 1, 2015, only cash, gold, and approved securities will qualify for SLR.
What you must do
- Increase CRR maintenance to 4% of net demand and time liabilities from July 12, 2014 fortnight.
- Reduce SLR holdings to 22.5% of net demand and time liabilities from the same date.
- Review SLR-eligible assets; term deposits with PSBs are valid only until March 31, 2015.
- Plan to replace term deposits with PSBs and balances with StCBs with approved securities or cash by April 1, 2015.
Who it affects
Non-scheduled State Cooperative Banks (StCBs), All Central Cooperative Banks (CCBs), Scheduled StCBs (already at 4% CRR, but SLR change applies)
Why did RBI increase CRR for non-scheduled StCBs and CCBs?
The Banking Laws (Amendment) Act 2012 gave RBI power to set CRR for these banks. The hike to 4% aligns them with scheduled StCBs for monetary stability.
Can we still use term deposits with PSBs for SLR after March 31, 2015?
No. From April 1, 2015, only cash, gold, and unencumbered approved securities will count for SLR. Term deposits with PSBs and balances with StCBs will no longer be eligible.
What is the effective date for these changes?
Both the CRR increase and SLR reduction take effect from the fortnight beginning July 12, 2014.