RBI may treat part of SLR as liquidity under Basel III

The central bank is looking at a move under which a part of banks' statutory liquidity ratio (SLR) holdings can be treated in a way that it complies with liquidity norms under the Basel III capital requirements.

hidden October 22, 2012 14:35:01 IST
RBI may treat part of SLR as liquidity under Basel III

RBI Deputy Governor Anand Sinha today said the central bank is looking at a move under which a part of banks' statutory liquidity ratio (SLR) holdings can be treated in a way that it complies with liquidity norms under the Basel III capital requirements.

"We are thinking on to how to work out a scheme under which a part of the SLR is treated as Basel III liquidity requirement," Sinha said at an event organised here by Care Ratings. He said the Basel III framework-adopted in the wake of the 2008 global financial crisis to safeguard banks in case of stress-asks for a liquidity coverage ratio that requires banks to hold marketable high quality liquidity assets.

RBI may treat part of SLR as liquidity under Basel III

Reuters

However, domestic banks can't be asked to hold it as they already have SLR holdings of 23 percent, which are not marketable, Sinha said, adding that it necessitates change in the framework.

SLR holdings are investments by banks in government securities and other liquid assets, acting as a liquidity buffer. Many banks have excess SLR holdings with the average holding in the system standing at close to 28 percent.

Since October 2010, the RBI has twice reduced the SLR limits by 1 percentage point each with the latest being in July.

Sinha also tried to allay fears about the impact of the Basel III regulations requiring higher capital adequacies, saying it is a cost, that too in the short-term, to pay for overall stability.

The net incremental capital requirement needed for the country's banks over the six-year transition period to adopt the Basel-III requirements in full is "less intimidating" than being discussed.

PTI

Updated Date:

also read

SBI announces 10 basis points hike in MCLR: Here's how it will impact your home, car loan EMIs
Business

SBI announces 10 basis points hike in MCLR: Here's how it will impact your home, car loan EMIs

Introduced by the Reserve Bank of India in 2016, MCLR is the minimum interest at which banks can lend to their customers. MCLR is generally revised on a monthly basis

At 7.79% retail inflation soars to eight-year high in April
Business

At 7.79% retail inflation soars to eight-year high in April

Inflation has remained above the RBI's comfort zone of 6 per cent for four months in a row mainly due to the Russia-Ukraine war which has impacted the prices of commodities across the globe

RBI hikes repo rate for first time in four years: What it is and how will it impact loans?
Business

RBI hikes repo rate for first time in four years: What it is and how will it impact loans?

The Reserve Bank of India decided to increase the repo rate by 40 basis points, citing rising inflation. Banks might hike interest rates on loans, which means EMIs on home, auto, and personal loans will go up