What changed
The Statutory Liquidity Ratio (SLR) for scheduled commercial banks and local area banks has been reduced from 23.0% to 22.5% of Net Demand and Time Liabilities (NDTL). This change takes effect from the fortnight beginning June 14, 2014, as announced in the Second Bi-Monthly Monetary Policy Statement 2014-15.
What it means for you
Banks will now need to hold fewer government securities and other approved assets against their deposits, releasing approximately 0.5% of NDTL for alternative uses. This additional liquidity can be deployed for credit expansion or investment in higher-yielding assets, potentially improving net interest margins. The move signals RBI's accommodative stance to support economic growth.
What you must do
- Recalculate SLR compliance for the fortnight starting June 14, 2014, using the new 22.5% threshold.
- Review your investment portfolio to redeploy freed-up funds into lending or other assets.
- Update internal systems and reporting templates to reflect the revised SLR requirement.
- Communicate the change to treasury and compliance teams to ensure smooth transition.
Who it affects
All Scheduled Commercial Banks, Local Area Banks
When does the new SLR of 22.5% become effective?
The reduced SLR of 22.5% applies from the fortnight beginning June 14, 2014.
Which banks are covered by this circular?
All Scheduled Commercial Banks and Local Area Banks are covered, excluding Regional Rural Banks.
What is the basis for calculating SLR under this circular?
SLR is calculated as a percentage of total net demand and time liabilities (NDTL) in India as on the last Friday of the second preceding fortnight.