Will continue to offer leeway on SLR, says RBI

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The Reserve Bank of India (RBI) said on Sunday it will continue to offer limited leeway to banks on the maintenance of statutory liquidity ratio (SLR) and will conduct a second set of auctions under its liquidity adjustment facility (LAF) till Thursday to help banks tide over liquidity tightness.

RBI said it won’t penalise banks if their minimum SLR holding dips to up to 24 per cent of their deposits when they pledge government securities for borrowing through the repo auctions.

As per RBI rules, to maintain SLR, banks have invest up to 25 per cent of their net demand and time liabilities in government securities. Any shortfall typically invites penal action.

Initially, this leeway was applicable only for Saturday and the second LAF was to be conducted on Friday and today.

RBI has offered this leeway and is conducting additional sets of auctions under LAF because liquidity has tightened and is spread unevenly due to the Coal India Ltd’s (CIL’s ) initial public share offer.

CIL’s issue closed after receiving subscriptions worth Rs 2.2 lakh crore. Excess bids received by the coal miner were being refunded since last week.

The inter-bank call money rate hit 12 per cent on Friday, a two-year high.

In May, RBI had announced similar liquidity easing measures after the outflows of 3G spectrum auctions tightened liquidity significantly.