RBI may treat part of SLR as liquidity under Basel III
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RBI Deputy Governor Anand Sinha on Monday 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. Sinha said this at an event organised in Mumbai 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. However, domestic banks can't be asked to hold it as they already have SLR holdings of 23 per cent, which are not marketable, Sinha added 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 per cent.
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