RBI slashes HTM bond limit in SLR to 23%
RBI reduced the requirement of holding HTM (held-to-maturity) category bonds in the SLR portfolio for the banks to 23 per cent.
By PTI | Updated:
MUMBAI: The Reserve Bank today reduced the requirement of holding HTM (held-to-maturity) category bonds in the SLR (statutory liquidity ratio) portfolio for the banks to 23 per cent from the existing 25 per cent.
As per RBI, the reduction will be effected by a quarterly reduction to the tune of at least 50 basis points beginning with the quarter ending June 2013.
"The realignment from 25 per cent to 23 per cent, in line with the recommendations of the working group on government securities and interest rate derivatives markets, would be effected by way of reduction of at least 50 bps every quarter, beginning with the quarter ending June 2013," the RBI said.
Traditionally, the HTM ratio is aligned with the overall SLR holding requirement set by the RBI. But despite the SLR coming down to 23 per cent, even as HTM ratio remained at the previously set 25 per cent, limiting banks' liquidity.
According to norms issued way back in September 2004, banks are permitted to exceed the limit of 25 per cent of total investments under HTM category, provided the excess comprises only of SLR securities and the total SLR securities held in the HTM category is not more than 25 per cent of their demand and time liabilities (DTL) as on the last Friday of the second preceding fortnight.
This relaxation was granted taking into account the requirement of maintenance of SLR of 25 per cent of DTL under Section 24 of the Banking Regulation Act, 1949 at that time, the RBI said, adding however the SLR requirement has since been brought down to 23 per cent of DTL.
Accordingly, the RBI said today, "Banks may exceed the present limit of 25 per cent of total investments under the HTM category provided the excess comprises only of SLR securities; and the total SLR securities held in the HTM category is not more than 23 per cent of their DTL as on the last Friday of the second preceding fortnight, that is to say in alignment with the current SLR requirement."
The RBI further said detailed guidelines on the same will be issued shortly.
As per RBI, the reduction will be effected by a quarterly reduction to the tune of at least 50 basis points beginning with the quarter ending June 2013.
"The realignment from 25 per cent to 23 per cent, in line with the recommendations of the working group on government securities and interest rate derivatives markets, would be effected by way of reduction of at least 50 bps every quarter, beginning with the quarter ending June 2013," the RBI said.
Traditionally, the HTM ratio is aligned with the overall SLR holding requirement set by the RBI. But despite the SLR coming down to 23 per cent, even as HTM ratio remained at the previously set 25 per cent, limiting banks' liquidity.
According to norms issued way back in September 2004, banks are permitted to exceed the limit of 25 per cent of total investments under HTM category, provided the excess comprises only of SLR securities and the total SLR securities held in the HTM category is not more than 25 per cent of their demand and time liabilities (DTL) as on the last Friday of the second preceding fortnight.
This relaxation was granted taking into account the requirement of maintenance of SLR of 25 per cent of DTL under Section 24 of the Banking Regulation Act, 1949 at that time, the RBI said, adding however the SLR requirement has since been brought down to 23 per cent of DTL.
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Accordingly, the RBI said today, "Banks may exceed the present limit of 25 per cent of total investments under the HTM category provided the excess comprises only of SLR securities; and the total SLR securities held in the HTM category is not more than 23 per cent of their DTL as on the last Friday of the second preceding fortnight, that is to say in alignment with the current SLR requirement."
The RBI further said detailed guidelines on the same will be issued shortly.
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