The Reserve Bank of India (RBI) on Monday announced reduction in the statutory liquidity ratio (SLR), the portion of deposits lenders are supposed to keep 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 RRBs is effective from December 18.
“It has been decided to reduce 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 initial and follow-on public offers (IPOs and FPOs) of certain public sector undertakings, advance tax payments and huge cash balances with the government.
RBI had also blamed high cash balance with the government for aggravating the liquidity strain and asked it to loosen purse strings for easing the situation.
“We expect the government to spend and reduce the cash balance to 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 the central bank injected over Rs 1.40 lakh crore through its repo window on Monday itself.