Relief on reserve ratio front. Amounts received as claims from credit guarantee company to be exempt from CRR, SLR

In a major relief for banks, the Reserve Bank of India has said the amounts received by them from the National Credit Guarantee Trustee Company Ltd (NCGTC) towards claims invoked and held by them pending adjustment of the same towards the relative advances, need not be treated as outside liabilities for the purpose of computation of deposits for maintaining statutory reserve ratios.

Since claims received from NCGTC will not be treated as outside liabilities for computation of deposits for maintaining statutory reserve ratios -- cash reserve ratio (CRR) and statutory liquidity ratio (SLR) -- the lendable resources of banks will go up to that extent.

CRR is the slice of deposits that banks have to park with RBI. It is currently at 4.5 per cent of deposits.

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SLR is the slice of deposits that banks have to invest in central and state government securities. It is currently at 18 per cent of deposits.

Currently, there are nine Credit Guarantee Trust Funds, including the Emergency Credit Line Guarantee Scheme, Loan Guarantee Scheme for Covid Affected Sectors, Credit Guarantee Scheme for MFIs, Credit Guarantee Fund for Micro Units and Credit Guarantee Fund for Education Loans, under the trusteeship management of NCGTC.

Credit guarantee programmes are designed to share the lending risk of enders and, in turn, facilitate access to finance for prospective borrowers.

Banking expert V Viswanathan said: "CRR reduction represents actual cash with the bank for lending, which goes up. SLR maintenance at 18 per cent is freed to the extent of reduced computation and is an additional source that can be tapped for fresh lending."

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