Markets

RBI to cut SLR gradually to 18% by mid-2019

Mumbai: The RBI has decided to reduce statutory liquidity ratio, the portion of funds which banks are required to park in treasury bills and other instruments, by 0.25 per cent every quarter beginning January.

The calibrated reduction in statutory liquidity ratio (SLR) will continue till it reaches 18 per cent. The current SLR is 19.5 per cent.

"This reduction in SLR holding is likely to free up Rs 1-1.5 lakh crore of funds in the next one and half year into the banking system," said Rajni Thakur, Economist, RBL Bank.

In the 'Statement on Developmental and Regulatory Policies' post announcing its fifth bi-monthly monetary policy review, the RBI said it will reduce the SLR by 25 basis points (0.25 per cent) every calender quarter until the SLR reaches 18 per cent of the net demand and time liabilities (NDTL) as part of aligning it with the liquidity coverage ratio (LCR).

The first reduction of 25 basis points will take effect in the quarter commencing January 2019, the Reserve Bank of India said.

The move may release funds locked in government securities and add to lendable liquidity. With inflation expectations lowered, this should not impact bond sentiment in a short run, said R K Gurumurthy – Head Treasury, Lakshmi Vilas Bank.

Bonds have rallied on the back of announcement that open market operations will continue and future policy and rate stance will depend on incoming data — implying a longer pause is the way forward, he added.

The RBI has kept the key repo rate — at which it lends to banks -unchanged at 6.50 per cent. It also cut the retail inflation projection to range between 2.7-3.2 per cent during October-March or the second half of the current financial year.

Zarin Daruwala, CEO, India, Standard Chartered Bank said it was heartening to note that the RBI was ready to ease monetary policy to support the economy.

Original Article

Related Posts

Markets

RBI to cut SLR gradually to 18% by mid-2019

Mumbai: The RBI has decided to reduce statutory liquidity ratio, the portion of funds which banks are required to park in treasury bills and other instruments, by 0.25 per cent every quarter beginning January.

The calibrated reduction in statutory liquidity ratio (SLR) will continue till it reaches 18 per cent. The current SLR is 19.5 per cent.

"This reduction in SLR holding is likely to free up Rs 1-1.5 lakh crore of funds in the next one and half year into the banking system," said Rajni Thakur, Economist, RBL Bank.

In the 'Statement on Developmental and Regulatory Policies' post announcing its fifth bi-monthly monetary policy review, the RBI said it will reduce the SLR by 25 basis points (0.25 per cent) every calender quarter until the SLR reaches 18 per cent of the net demand and time liabilities (NDTL) as part of aligning it with the liquidity coverage ratio (LCR).

The first reduction of 25 basis points will take effect in the quarter commencing January 2019, the Reserve Bank of India said.

The move may release funds locked in government securities and add to lendable liquidity. With inflation expectations lowered, this should not impact bond sentiment in a short run, said R K Gurumurthy – Head Treasury, Lakshmi Vilas Bank.

Bonds have rallied on the back of announcement that open market operations will continue and future policy and rate stance will depend on incoming data — implying a longer pause is the way forward, he added.

The RBI has kept the key repo rate — at which it lends to banks -unchanged at 6.50 per cent. It also cut the retail inflation projection to range between 2.7-3.2 per cent during October-March or the second half of the current financial year.

Zarin Daruwala, CEO, India, Standard Chartered Bank said it was heartening to note that the RBI was ready to ease monetary policy to support the economy.

Original Article

Related Posts