Statutory Liquidity Ratio (SLR)

In terms of Section 24 (2-A) of the B.R. Act, 1949 all Scheduled Commercial Banks, in addition to the average daily balance which they are required to maintain under Section 42 of the RBI Act, 1934, are required to maintain in India,

1. in cash, or

2. in gold valued at a price not exceeding the current market price, or

3. in unencumbered approved securities valued at a price as specified by the RBI from time to time.

an amount of which shall not, at the close of the business on any day, be less than 25 per cent or such other percentage not exceeding 40 per cent as the RBI may from time to time, by notification in gazette of India, specify, of the total of its demand and time liabilities in India as on the last Friday of the second preceding fortnight,

At present, all Scheduled Commercial Banks are required to maintain a uniform SLR of 25 per cent of the total of their demand and time liabilities in India as on the last Friday of the second preceding fortnight which is stipulated under section 24 of the B.R. Act, 1949.

The procedure to compute total net demand and time liabilities for the purpose of SLR under Section 24 (2) (B) of B.R. Act 1949 is similar to the procedure followed for CRR purpose. However, it is clarified that Scheduled Commercial Banks are required to include inter-bank term deposits / term borrowing liabilities of original maturities of 15 days and above and up to one year in 'Liabilities to the Banking System'. Similarly banks should include their inter-bank assets of term deposits and term lending of original maturity of 15 days and above and up to one year in 'Assets with the Banking System' for the purpose of maintenance of SLR. However, both the above liabilities and assets are not to be included in liabilities/assets to the banking system for computation of DTL/NDTL for the purpose of CRR as mentioned above.

The entire investment portfolio of the banks (including SLR Securities) will be classified under three categories viz.' Held to Maturity', 'Available for sale' and 'Held for Trading'.

1. Investment classified under Held to Maturity category need not be marked to market and will be carried at acquisition cost unless it is more than the face value. In such a case, the premium should be amortised over a period remaining to maturity.

2. Individual scrips in the Available for Sale category will be marked to market at the year-end or at more frequent intervals. The net depreciation under each classification should be recognized and fully provided for and any appreciation should be ignored. The book value of the individual securities would not undergo any change after the revaluation.

3. The individual scrips in the Held for Trading category will be revalued at monthly or at more frequent intervals and net appreciation/depreciation under each classification will be recognized in income account. The book value of the individual scrip will be changed with revaluation.

If a banking company fails to maintain the required amount of SLR, it shall be liable to pay to RBI in respect of that default, the penal interest for that day at the rate of 3 per cent per annum above the bank rate on the shortfall and if the default continues on the next succeeding working day, the penal interest may be increased to a rate of 5 percent per annum above the Bank Rate for the concerned days of default on the shortfall.

1. Banks should submit to the RBI before 20th day of every month, a return in form VIII showing the amounts of SLR held on alternate Fridays during immediate preceding month with particulars of their DTL in India held on such Fridays or if any such Friday is a public holiday under the Negotiable Instruments Act, 1881, at the close of business on the preceding working day.

2. Banks should also submit a statement as annexure to form VIII giving daily position of (a) value of securities held for the purpose of compliance with SLR and (b) the excess cash balances maintained by them with RBI in the prescribed format.

The Statutory Auditors should verify and certify that all items of outside liabilities, as per the bank's books had been duly compiled by the bank and correctly reflected under DTL/NDTL in the fortnightly/monthly statutory returns submitted to RBI for the financial year.