What changed
RBI has decided that balances held by banks under the newly instituted Standing Deposit Facility (SDF) will be considered an eligible SLR asset. These balances must be reported under 'Cash in hand' in Form VIII or Form I for SLR maintenance. However, SDF balances cannot be used for Cash Reserve Ratio (CRR) compliance.
What it means for you
Banks can now use SDF deposits to meet their SLR requirements, offering more flexibility in liquidity management. This reduces the need to hold additional government securities for SLR, potentially freeing up balance sheet capacity. However, since SDF balances don't count for CRR, banks must still maintain separate cash reserves for that purpose.
What you must do
- Update internal SLR reporting systems to include SDF balances under 'Cash in hand' in Form VIII or Form I.
- Ensure treasury teams are aware that SDF balances are SLR-eligible but not CRR-eligible.
- Review liquidity buffers to optimize use of SDF for SLR compliance without affecting CRR obligations.
- Train reporting staff on the revised classification for SLR maintenance.
Who it affects
All Scheduled Commercial Banks, Regional Rural Banks, Local Area Banks, Small Finance Banks, Payments Banks, Primary Urban Co-operative Banks, State and Central Co-operative Banks
Can SDF balances be used for both SLR and CRR maintenance?
No, SDF balances are eligible only for SLR maintenance, not for CRR. They count as 'cash' for SLR but are excluded from CRR calculations.
How should banks report SDF balances for SLR?
Banks must report SDF balances under 'Cash in hand' in Form VIII or Form I, as applicable, for SLR maintenance.
When did this change take effect?
The change was announced on April 8, 2022, and took effect immediately from that date.