RBI allows Banks to acquire and hold SLR securities issued on or after Sep 1 [Read Circular]

The Reserve Bank of India (RBI) has permitted banks to acquire and hold Statutory Liquidity Ratio (SLR) securities issued on or after September 1, 2020, in the Held To Mature (HTM) category, subject to an overall limit of 22 percent of NDTL, up to March 31, 2021, which shall be reviewed thereafter.

SLR is holding of a portion of deposits in liquid form i.e. cash, gold, or govt. securities by commercial banks to control the expansion of bank credit. The ratio of mandatory liquid assets to total deposits is termed as Statutory Liquidity Ratio and it is determined by the RBI to meet the changing monetary policy.

Held to Maturity (HTM) investments are investments made by the bank which it intends to hold till maturity. Banks normally hold securities acquired by them with the intention to hold them up to maturity under the HTM category. Only debt securities are permitted to be held under HTM with a few exceptions, e.g., equity held in subsidiaries.

 Currently, banks are permitted to exceed the limit of 25 percent of the total investments under the HTM category, provided the excess comprises only of SLR securities and total SLR securities held under the HTM category is not more than 19.5 percent of Net Demand and Time Liabilities( NDTL) as on the last Friday of the second preceding fortnight.