The Reserve Bank of India will ease the Statutory Liquidity Ratio (SLR) norms from October to induce liquidity into the financial system, amid concerns of a credit crunch.
SLR is a reserve requirement that commercial banks must maintain.
According to the RBI, “the increase in ‘Facility to Avail Liquidity for Liquidity Coverage Ratio’ (FALLCR), announced today (Thursday) for effect from October 1, 2018, from the existing 11 per cent to 13 per cent will take the carve-out from SLR available to banks to 15 per cent of their NDTLA(Net Demand and Time Liabilities)”.
The development comes days after the apex bank had assured that it would take steps to ensure adequate liquidity is available in the financial system.
“This should supplement the ability of individual banks to avail of liquidity, if required, from the repo markets against high-quality collateral,” the RBI said in a statement on Thursday.
“This, in turn, will help improve the distribution of liquidity in the financial system as a whole.”
Also, the apex bank said that it would use various available instruments to meet the durable liquidity requirements of the financial system.