The Hindu Business Line : `SLR Ordinance likely by month-end'

The Presidential decree to empower the Reserve Bank of India to lower Statutory Liquidity Ratio (SLR) below 25 per cent could be issued by month-end or latest by February 3, a top Finance Ministry official said.

The official said that the Ordinance would be sent for Presidential assent in the next two days. The timing of the issuance assumes importance, as the RBI is to come up with its quarterly credit and monetary policy review on January 31.

The Centre had last week announced that the Ordinance was being issued to provide more operational flexibility to the RBI in the conduct of the monetary policy. It would allow the RBI to set its own SLR as against the current stipulation of 25 per cent in law.

The market is rife with speculation that the RBI could use the occasion of the quarterly review to announce a cut in SLR.

Under the present requirement, banks have to keep at least 25 per cent of their net demand and time liabilities (i.e deposits) in the form of liquid assets comprising cash, gold and approved securities, mainly government bonds.

Any move to lower SLR would allow banks to offer more credit to industry.

An Ordinance can be promulgated only before the President summons Parliament, which is generally 21 days before any session. With the Budget session of Parliament likely to begin on February 23, sources indicated that the Ordinance was unlikely to be issued after February 3.

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`SLR Ordinance likely by month-end'