What changed
RBI replaced the September 2009 SLR notification (partially modified in July 2010) with a new one dated May 9, 2011. The new notification updates the list of eligible SLR securities, including dated securities issued up to May 6, 2011, and clarifies that securities under LAF are not eligible. It also aligns with the introduction of the Marginal Standing Facility (MSF) allowing overnight borrowing up to 1% of NDTL from May 7, 2011.
What it means for you
Banks must ensure their SLR compliance uses the updated list of eligible securities and excludes LAF-acquired securities. The MSF provides an additional liquidity window, but borrowing under it does not count toward SLR assets. The 24% SLR requirement remains unchanged, but the asset composition rules are now clearer and consolidated.
What you must do
- Replace old SLR notification references with the new May 9, 2011 notification for compliance.
- Ensure SLR assets exclude securities acquired under LAF (including margin).
- Update internal systems to include only eligible SLR securities as per the new list (dated securities up to May 6, 2011, T-bills, G-secs, SDLs, etc.).
- Note that MSF borrowing up to 1% of NDTL is available from May 7, 2011, but does not affect SLR asset computation.
- Review encumbered securities: they cannot be counted for SLR unless not drawn against.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Treasury and ALM departments, Compliance and risk management teams
What is the SLR percentage under this notification?
The SLR remains at 24% of net demand and time liabilities (NDTL) as per the earlier circular of December 16, 2010. This notification only updates the list of eligible assets.
Can we use securities acquired under LAF for SLR compliance?
No. Securities (including margin) acquired under the Liquidity Adjustment Facility (LAF) are explicitly excluded from being treated as eligible SLR assets.
Does the MSF borrowing affect our SLR calculation?
No. MSF borrowing up to 1% of NDTL is a separate facility and does not impact SLR asset computation. SLR assets must be maintained independently.