Urban Co-Op Banks Get Slr Leeway

The Reserve Bank of India (RBI) has decided to give urban co-operative banks (UCBs) extra-time, on a case-by-case basis, to meet the norms relating to investment in government and other approved securities as part of their statutory liquidity ratio (SLR) holdings.

The move comes in the wake of some of the UCBs expressing difficulty in complying with the stipulated time-frame on SLR holdings.

RBI said that the relaxation has been made in order to smoothen the process of compliance in respect of banks that may have difficulties in adhering with the RBI norms on SLR investments.

The RBI has advised the banks wanting to avail of the relaxation in achieving the prescribed level of SLR holdings to send in their applications before April 15.

In the aftermath of the Ahmedabad-based Madhavpura Mercantile Co-operative Bank going belly-up in March 2001, the RBI had prescribed stringent prudential measures for the sector in October 2001.

Around 160 small co-operative banks in Gujarat had placed around Rs 600 crore by way of term deposits with the Madhavpura Co-operative Bank in fulfilment of their SLR requirements.

The RBI clamped down on this practice of small banks placing deposits with larger co-operative banks by prescribing a gradual increase in their investments in the government and other approved securities so as to reach 25 per cent of the net demand and time liabilities (NDTL). It also asked the banks to unwind their existing deposits by June 2002.

As per the RBI prescription for the co-operative banks, the scheduled UCBs have to achieve a minimum 17.5 per cent SLR holding (calculated as a percentage of the NDTL) in government and other approved securities by March 31, 2002, and 20 per cent by September 30, 2002. Before the RBI announcement in October, the SLR holding norm for these banks in government and other approved securities was at 15 per cent.

In the case of UCBs (non-scheduled) with NDTL of Rs 25 crore and above, they have to achieve a minimum 12.5 per cent SLR holding in government and other approved securities by March 31, 2002, and 15 per cent by September 30, 2002.

In case of UCBs (non-scheduled) with NDTL of less than Rs 25 crore, the SLR prescription is 7.5 per cent by March 31, 2002, and 10 per cent by September 30, 2002.