What changed
The enhanced HTM limit of 22% of NDTL, previously available only for SLR securities acquired between September 1, 2020 and March 31, 2021, is now extended to include securities acquired up to March 31, 2022. The restoration timeline is pushed back: instead of starting June 30, 2022, the phased reduction now begins from June 30, 2023, with targets of 21% by June 30, 2023, 20% by September 30, 2023, and 19.5% by December 31, 2023. Banks are also allowed to shift excess SLR securities from HTM to AFS/HFT during the quarter of each reduction, in addition to the annual shift permitted at the start of the accounting year.
What it means for you
Banks get more breathing room to manage their SLR portfolios without forced sales, as the higher HTM cap stays for an extra year. This reduces mark-to-market volatility on government bond holdings, especially for securities acquired during the pandemic period. The phased restoration gives banks time to plan orderly exits from excess HTM positions, and the additional shifting window helps avoid disruption in quarterly compliance.
What you must do
- Review your current SLR securities under HTM and identify those acquired between September 1, 2020 and March 31, 2022 that qualify for the enhanced 22% limit.
- Update your ALM and investment policy to reflect the new restoration schedule: 21% by June 30, 2023, 20% by September 30, 2023, and 19.5% by December 31, 2023.
- Plan the phased reduction of excess HTM securities, utilizing the additional shifting window to AFS/HFT during each reduction quarter.
- Ensure board approval for any shifting of securities from HTM to AFS/HFT, as required under extant instructions.
Who it affects
All commercial banks holding SLR securities in HTM category, Treasury and ALM desks managing investment portfolios, Risk management teams monitoring market risk and liquidity
What is the new deadline for the enhanced HTM limit of 22%?
The enhanced HTM limit of 22% of NDTL is now available until March 31, 2023, for SLR securities acquired between September 1, 2020 and March 31, 2022.
How will the restoration to 19.5% happen?
The restoration is phased: SLR securities under HTM as a percentage of NDTL must not exceed 21% by June 30, 2023, 20% by September 30, 2023, and 19.5% by December 31, 2023.
Can we shift excess HTM securities to AFS/HFT outside the annual window?
Yes, RBI allows shifting of excess SLR securities from HTM to AFS/HFT during the quarter in which the HTM ceiling is reduced, in addition to the annual shift permitted at the start of the accounting year.