What changed
Previously, the total HQLA carve-out from mandatory SLR was 18% of NDTL (3% MSF + 15% FALLCR), but after MSF was reduced to 2% from January 1, 2022, it fell to 17%. Now, RBI has raised FALLCR to 16% of NDTL, bringing the total carve-out back to 18% of NDTL (2% MSF + 16% FALLCR).
What it means for you
Banks can now count an additional 1% of NDTL in government securities as Level 1 HQLA under FALLCR, effectively reversing the earlier reduction. This provides more liquidity headroom for meeting LCR requirements without needing to hold extra unencumbered assets. It eases pressure on banks' liquidity buffers, especially amid tighter market conditions.
What you must do
- Update your LCR computation models to reflect the new FALLCR limit of 16% of NDTL.
- Recalculate eligible Level 1 HQLA from mandatory SLR holdings to capture the additional 1% carve-out.
- Review liquidity contingency plans to leverage the restored HQLA buffer effectively.
- Communicate the change to treasury and risk management teams for immediate implementation.
Who it affects
All Commercial Banks (excluding RRBs, LABs, and Payments Banks), Treasury departments managing SLR and HQLA portfolios, Risk management teams handling LCR reporting
What is FALLCR and how does this change impact my bank?
FALLCR (Facility to Avail Liquidity for Liquidity Coverage Ratio) allows banks to use a portion of mandatory SLR government securities as Level 1 HQLA. The increase from 15% to 16% of NDTL means your bank can now count more government securities towards LCR, improving liquidity coverage.
Does this circular apply to all banks?
No, it applies to all Commercial Banks except Regional Rural Banks, Local Area Banks, and Payments Banks. Check your bank's classification to confirm applicability.
When does this change take effect?
The instructions came into force with immediate effect from April 18, 2022, the date of the circular.