What changed
RBI confirmed that overnight SDF balances are eligible as Level 1 HQLA for LCR computation, effective from November 23, 2022.
What it means for you
Banks can now treat SDF deposits as high-quality liquid assets, improving their LCR without needing additional government securities or cash. This reduces the cost of maintaining liquidity buffers and offers more flexibility in liquidity management.
What you must do
- Update your LCR computation models to include overnight SDF balances as Level 1 HQLA.
- Review liquidity contingency plans to leverage SDF for buffer management.
- Ensure treasury and ALM teams are aware of this classification for reporting.
- Monitor any future RBI clarifications on intraday or term SDF treatment.
Who it affects
All commercial banks (excluding LABs, RRBs, and Payments Banks), Treasury and ALM departments, Risk management teams handling LCR reporting
Can term SDF deposits also be counted as HQLA?
The circular specifically addresses overnight balances only. Term SDF deposits are not mentioned, so they should not be treated as HQLA until further clarification.
Does this change affect the LCR calculation for all banks?
Yes, for all commercial banks covered by the circular. Local Area Banks, Regional Rural Banks, and Payments Banks are excluded from this instruction.
When does this clarification take effect?
The instructions are effective immediately from the date of the circular, November 23, 2022.