SLR norms for urban cooperatives revised

MID-TERM MONETARY POLICY 2008-09/ Policy & The Financial Sector

The Reserve Bank of India (RBI) has asked non-scheduled urban co-operative banks (UCBs) with capital of less than Rs 100 crore to invest at least 7.5 per cent of their deposits in government and other approved securities. The rule has to be implemented by September 30, 2009.

These banks have to step up their investments in government securities to as much as 15 per cent of their deposits by March 31, 2010. Earlier, the so-called Tier-I UCBs had the flexibility on its investments to comply with the statutory liquidity ratio (SLR) on 15 per cent of the deposits.

The UCBs could invest in government and approved securities, including interest-bearing deposits with the State Bank of India, their subsidiary banks, public sector banks and also Industrial Development Bank of India.

In respect of non-scheduled UCBs in Tier-II, the current level of holding SLR in government and other approved securities is not less than 15 per cent of their total net demand and time liability (NDTL) and this shall continue up to March 31, 2010.

“It is a welcome decision as keeping deposits in district central co-operative banks (DCCBs) or state co-operative banks is a losing proposition as most of them are in shambles. In such volatile situations, government securities are a safe alternative,” Mukund Ghaisas, director, Ahmednagar Shahar Shahkari Bank.

“UCBs will have to keep in mind the maturity-date while keeping deposit with DCCBs as it should mature before April 2011,” he said.