Reflecting the improvement in credit offtake, excess holdings of statutory liquidity ratio (SLR) securities of Scheduled Commercial Banks (SCBs) moderated to 8.8 per cent of their net demand and time liabilities (NDTL) as on August 26, 2022 from 10.4 per cent at end-March 2022, according to RBI’s Monetary Policy Report.
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Banks are required to invest 18 per cent of their deposits in SLR securities, comprising central and state government securities.
Excess SLR holdings provide collateral buffers to banks for availing funds under the LAF and are also a component of the liquidity coverage ratio (LCR).
RBI Governor Shaktikanta Das, in his latest statement, observed drawdown of excess cash reserve ratio (which requires banks to park 4.5 per cent of deposits with RBI) and excess SLR holdings of banks can also augment system liquidity.
Banks’ non-SLR investments – covering CPs, bonds, debentures and shares of public and private corporates – were lower during H1 FY23, mainly due to a decline in investment in bonds/debentures, the report said.
Adjusted non-food credit (the sum of non-food credit of banks and their non-SLR investments) growth at 14.9 per cent as on September 9 was higher than 9.1 per cent as at end-March 2022.
During H1 FY23, bank credit growth accelerated in tandem with improving economic activity. Growth in non-food bank credit increased to 16.7 per cent as on September 9, 2022 from 9.7 per cent as at end-March 2022. The improvement in bank credit was seen across all major sectors, the report said.
The MPR noted that the asset quality of SCBs improved, with the overall NPA ratio declining to 5.6 per cent in June 2022 from 7.5 per cent a year ago. Asset quality improved across all the major sectors.