RBI cuts SLR for rural banks to 24% | business | Hindustan Times
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RBI cuts SLR for rural banks to 24%

business Updated: Dec 27, 2010 19:42 IST

The Reserve Bank of India on Monday announced reduction of Statutory Liquidity Ratio (SLR), requirement for lenders to keep a portion of deposits in government securities, cash and gold, by one percentage point to 24 per cent for regional rural banks (RRBs).

This is in line with the similar cut announced in the monetary review for banks earlier this month as part of its measure to bring more liquidity into the system.

The new requirement for the RRBs is effective from December 18.

"It has been decided to reduce the SLR for RRBs from 25 per cent of their Net Demand and Time Liabilities (NDTL) to 24 per cent with effect from December 18," RBI said in a notification.

The new measure would mean that RRBs can now keep less of government securities and have more lendable resources for credit needs.

The system is facing acute liquidity crunch, specially on account of the IPOs and FPOs of certain public sector undertakings, advance tax payments and huge cash balances with the government.

The RBI had also blamed high cash balance with the government for aggravating liquidity strain in the system and asked it to loosen purse strings for easing the situation.

"We expect the government to spend and reduce the cash balance and ease the liquidity position. Although the government is spending, it is not enough," RBI Governor D Subbarao had said recently.

The liquidity crunch in the system can be gauged from the fact that RBI injected over Rs 1.40 lakh crore through repo (short-term lending against government securities) window today itself.

Last week, on two occasions, the figures hade even crossed Rs 1.55 lakh crore.