## Policy Summary: Liquidity Coverage Ratio (LCR) - Level 1 High Quality Liquid Assets (HQLAs)
This circular, DOR.LRG.REC.1921.04.098/2022-23, issued by the Reserve Bank of India (RBI) on April 18, 2022, pertains to the Basel III Framework on Liquidity Standards, specifically the Liquidity Coverage Ratio (LCR). It modifies the extent to which banks can reckon Government securities as Level 1 HQLA within the mandatory Statutory Liquidity Ratio (SLR) requirement.
The circular amends the previous guidelines outlined in DOR.BP.BC.No.65/21.04.098/2019-20 dated April 17, 2020. Previously, the total HQLA carve-out from the mandatory SLR that could be reckoned for meeting LCR requirements was 17% of Net Demand and Time Liabilities (NDTL), comprising 2% for Marginal Standing Facility (MSF) and 15% for Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR).
Effective immediately, banks are now permitted to reckon Government securities as Level 1 HQLA under FALLCR within the mandatory SLR requirement up to 16% of their NDTL. Consequently, the total HQLA carve-out from the mandatory SLR that can be reckoned for meeting the LCR requirement will be 18% of NDTL, comprising 2% for MSF and 16% for FALLCR.
This circular is applicable to all Commercial Banks, excluding Regional Rural Banks, Local Area Banks, and Payments Banks.
For further information, contact the Department of Regulation, Central Office, Reserve Bank of India at:
* Address: 12th and 13th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400 001
* Tel: 022-22601000
* Fax: 022-22705691
* Email: cgmicdor@rbi.org.in
* Website: www.rbi.org.in
Key Entities Referenced
Reserve Bank of India: The central bank of India, the issuing authority of this notification.
Basel III Framework on Liquidity Standards: An international regulatory framework for banks to improve liquidity risk management.
Liquidity Coverage Ratio (LCR): A key component of the Basel III framework, requiring banks to hold sufficient high-quality liquid assets (HQLA) to cover net cash outflows over a 30-day stress period.
High Quality Liquid Assets (HQLAs): Assets that can be easily and quickly converted into cash to meet liquidity needs.
Statutory Liquidity Ratio (SLR): The minimum percentage of deposits that a commercial bank must maintain in the form of liquid assets like cash, gold, and government securities.
Marginal Standing Facility (MSF): A facility under which scheduled commercial banks can borrow overnight funds from the Reserve Bank of India (RBI) against their SLR portfolio.
Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR): A facility that allows banks to use government securities within the mandatory SLR requirement to meet LCR requirements.
Net Demand and Time Liabilities (NDTL): The difference between the sum of demand and time liabilities (deposits) of a bank and its interbank assets.
भारतीय �रज़व� ब�क
________________________RESERVE BANK OF INDIA________________________
www.rbi.org.in
RBI/2022-23/25
DOR.LRG.REC.19/21.04.098/2022-23 April 18, 2022
Dear Sir/Madam,
Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR)
Please refer to our circular DOR.BP.BC.No.65/21.04.098/2019-20 dated April 17, 2020
on Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR).
2. In terms of the circular ibid, the assets allowed as Level 1 High Quality Liquid Assets
(HQLAs) for the purpose of computing the LCR, inter alia, include (a) Government
securities in excess of the mandatory SLR requirement and (b) within the mandatory
SLR requirement, Government securities to the extent allowed under (i) Marginal
Standing Facility (MSF) and (ii) Facility to Avail Liquidity for Liquidity Coverage Ratio
(FALLCR) [15 per cent of the banks’ Net Demand and Time Liabilities (NDTL)].
3. Since MSF has been reduced to 2 per cent from 3 per cent of NDTL from January 1,
2022, the total HQLA carve out from the mandatory SLR, which can be reckoned for
meeting LCR requirement, has reduced to 17 per cent of NDTL (2 per cent MSF plus 15
per cent FALLCR) from 18 percent.
4. On a review, it has been decided to permit banks to reckon Government securities as
Level 1 HQLA under FALLCR within the mandatory SLR requirement up to 16 per cent
of their NDTL. Accordingly, the total HQLA carve out from the mandatory SLR, which
िविनयमन िवभाग,क�द्रीय काया�लय, 12 वी ंऔर 13 वी ंमंिजल, क�द्रीय काया�लय भवन, शहीद भगत िसंह माग�,फोट�,मुंबई-400001
दूरभाष: 022-22601000 फै�: 022-22705691 ई-मेल: cgmicdor@rbi.org.in
____________________________________________________________________________________________________________________________________
Department of Regulation, Central Office, 12th and 13th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai- 400 001
Tel: 022- 2260 1000 Fax: 022-2270 5691 email: cgmicdor@rbi.org.in
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चेतावनी: भारतीय �रज़व� ब�क �ारा ई-मेल, डाक, एसएमएस या फोन कॉल के ज�रए िकसी की भी ��� की जानकारी जैसे ब�क के खाते का �ौरा, पासवड�
आिद नही ंमांगी जाती है। यह धन रखने या देने का प्र�ाव भी नही ंकरता है। ऐसे प्र�ावो ंका िकसी भी तरीके से जवाब मत दीिजए।
Caution: RBI never sends mails, SMSs or makes calls asking for personal information like bank account details, passwords, etc.It
never keeps or offers funds to anyone. Please do not respond in any manner to such offers.can be reckoned for meeting LCR requirement will be 18 per cent of NDTL (2 per cent
MSF plus 16 per cent FALLCR).
Applicability:
5. This circular is applicable to all Commercial Banks other than Regional Rural Banks,
Local Area Banks and Payments Banks.
6. These instructions shall come into force with immediate effect.
Yours faithfully
(Usha Janakiraman)
Chief General Manager