KARACHI (May 26 2004): The State Bank has decided that all development finance institutions (DFIs) shall maintain Statutory Liquidity Requirement (SLR) @ 15 percent of their Total Time & Demand Liabilities in the form of liquid assets (excluding Cash Reserve maintained @ 1 percent of their TDL).
“They will continue to maintain Cash Reserve (CRR) with State Bank of Pakistan @ 1 percent of their Demand & Time Liabilities,” said a circular issued on Tuesday.
In terms of Section 29 of the Banking Companies Ordinance, 1962 (BCO), every banking company and financial institution specified in Section 3A is required to maintain Statutory Liquidity Requirement (SLR) in cash, gold or unencumbered approved securities valued at a price not exceeding “the lower of the cost or the current market price” an amount which shall not at the close of business on any day be less than “such percentage” of the total of its Time and Demand Liabilities (TDL) in Pakistan, as may be notified by the State Bank from time to time, said the circular.
The SBP further said that the Total Time and Demand Liabilities (TDL) for the purpose of SLR and CRR shall be determined by excluding the following items:
— Total Equity including Paid-up Capital, Reserves and unappropriated profit/ (Loss).
— Borrowings from Banks and DFIs.
— Borrowings from State Bank of Pakistan.
— Deposits from Banks and DFIs.
— All liabilities, except those specifically listed above, will be included in TDL of DFIs for the purpose of computing SLR and CRR.
Furthermore, Liquid Assets in terms of section 29 of the BCO shall include cash in hand, gold and Un-encumbered Approved Securities. DFIs are required to report the amount of Unencumbered Approved Securities (eligible for the purpose of SLR in terms of Section 5(a)(ii) of the BCO) along with its break up in their weekly statement of liquidity.
PIBs are eligible approved security for SLR purposes only to the extent of 5percent of the Total Demand & Time Liabilities (TDL).
However, keeping in view their current investment in PIBs, DFIs are allowed to report total investment in PIBs (held in their own account) as an approved security eligible for SLR up to December 31, 2005.
All the DFIs are required to furnish to the State Bank a weekly Statement of Liquidity Position showing the details of the liquid assets and liabilities in terms of the provision contained in Section 29 of the BCO. Penalty on account of shortfall in SLR, if any, will be levied on the basis of this statement, on weekly basis.
Rate of penalty in case of default in maintenance of SLR is Rupees 86 per Rupees hundred thousand (Rs 100,000) or part thereof per day.
For SLR purpose, TDL would be calculated on weekly basis, which will be applicable from the date of the weekend ie Saturday to a day before next weekend. Further, DFIs are required to maintain prescribed level of SLR at the close of business on daily basis.
The above instructions shall supersede the existing NBFIs Rule 6 on the subject, and shall come into force wef 1st January 2005.
All DFIs shall henceforth report their SLR and shall regularise their position in accordance with these instructions before expiry of this transitory period ie by December 31, 2004.
A list of eligible securities for maintaining SLR is included here.
Approved Security for the purposes of Section 29 of the Banking Companies Ordinance, 1962 has been defined in Section 5(a)(ii) of the said ordinance.
Presently, following Securities are eligible as approved securities for maintaining Statutory Liquidity Requirement.
Federal Investment Bonds, Treasury Bills, Pakistan Investment Bonds (holding in Bank's 'Own Account').
Rupee obligation of the Federal Government or a Provincial Government or of a corporation, fulfilling the condition of Section 5(a)(ii) of BCO, 1962.
Registered National Investment Trust Units.