RBI weighing capital status for banks’ SLR holdings under Basel III

07 Nov 2011

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In a bid to help banks find resources to meet capital requirements under Basel III norms, the Reserve Bank of India (RBI) is looking at the possibility of according capital status to banks' holdings under the statutory liquidity ratio (SLR).

Delivering the valedictory speech at the Bancon 2011 conference in Chennai on Sunday, RBI deputy governor Anand Sinha said the central bank is considering how the SLR can be used to meet capital requirements under the Basel III norms.

Currently, Indian banks have to mandatorily invest a minimum 24 per cent of their deposits in government bonds and other approved securities. With the current SLR holdings of banks ruling at around 29 per cent, RBI expects the excess holdings to act as a capital shield for the lenders.

"We are looking at some norms to what extent SLR portion can be used under Basel III norms," Sinha said.

Banks in India are estimated to require fresh capital to the tune of Rs8,00,000 crore to be well capitalised for their growth requirements between 2013 and 2019 under Basel III norms.

Basel III norms require banks in India to have a minimum Tier I capital of 9 per cent.

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