KARACHI (May 29 2004): The State Bank on Friday issued Master Circular containing consolidated instructions about Statutory Liquidity Requirement.
In terms of Section 29 of the Banking Companies Ordinance, 1962, banks are required to maintain Statutory Liquidity Requirement in cash, gold or unencumbered approved securities valued at a price not exceeding 'the lower of the cost or the current market price' equivalent to an amount which shall not at the close of business on any day be less than 'such percentage' of the total of their time and demand liabilities in Pakistan as may be notified by the State Bank from time to time, said the circular issued by SBP.
Presently, banks are required to maintain the liquid assets @ 15 percent (excluding Statutory Cash Reserve maintained under section 36(1) of the State Bank of Pakistan Act, 1956) of their total time and demand liabilities in Pakistan with effect from July 12, 1999.
In order to facilitate the banks, instructions issued from time to time on the subject have been consolidated and are given hereunder: –
The Total Time and Demand Liabilities (TDL) for the purpose of determining Statutory Liquidity Requirement (SLR) and Cash Reserve Requirement (CRR) shall include the following heads of accounts of Weekly Statement of Position (WSP):
a) Demand Deposits (General)
b) Other Demand Liabilities
(c) Time Deposits (General)
d) Other Time Liabilities
================================================================ Liabilities Main 'head ' Foot Note of WSP of WSP ================================================================ Deposits from banks (Demand) 01-02 - Borrowing from banks (Demand) 01-03 - Deposits from banks (Time) 02-02 - Borrowings from banks (Time) 02-03 - Money at call & short notice in Pakistan 05-00 - Special Exporter's A/c - 81-00 F.E.25 deposits 01-01 & 02- 80.03 (i) (against which banks are separately 01 required to maintain CRA & SCRA in US$) ================================================================
In terms of Section 36 of State Bank of Pakistan Act, 1956, and Section 29 of the Banking Companies Ordinance, 1962, 'Liabilities' shall not include the paid up capital or the reserves or any credit balance in the profit and loss account of the Banking Company or the amount of any loan taken from the State Bank or any such liabilities as may be notified by the State Bank for the purpose. Accordingly, the following liabilities of WSP shall not be taken into account while computing the TDL:
All liabilities, except those specifically listed above, shall be included in TDL of banks in Pakistan for the purpose of computing SLR and CRR. For SLR purpose, TDL at the close of business on every Saturday (and if Saturday is a holiday, on the previous working day) shall continue to be taken into account, up to a day preceding the next weekend ie Friday.
The composition of liquid assets and their reporting in the Weekly Statement of Position shall be as under:
=================================================================== Liquid Assets Main 'head" Foot Note of WSP of WSP =================================================================== Cash in Pakistan Plus Foreign Currency held in Pakistan Code.11.00 Code 13.01 Code.52.00 - Balances with SBP (In Current A/C.) Code 12.01 Code 53.01&02 PLS Term Deposit Account with SBP. Code 12.01 Code 53.06 Balance with NBP. Code 12.02 - Un-encumbered Approved Securities Code 17.01 Code 54.00 (List as per Annexure B) to 17.04 Deposits under Section13 (3) of Code 12.01& Code 56.01& BCO, 1962 (Capital maintained Code 17.00 03 by Foreign Banks) Code 56.02 Share Capital of Khushali Bank Code 17.05 Code 90.00 ===================================================================
In terms of Section 29 ibid, 'Balance (of banks) with SBP' is a part of liquid assets, therefore, the monitoring of compliance with prescribed SLR is done by the State Bank by including the prevailing percentage of CRR.
Presently, SLR is 15 percent (excluding CRR of 5 percent of TDL on weekly average basis) with effect from July 12, 1999. However, it may be clarified that while monitoring compliance with SLR the State Bank clubs CRR with SLR in terms of Section 29, which comes to 20percent (including CRR of 5 percent) of TDL.
The banks are required to maintain this level of SLR (20 percent) at the close of business on every day.
In case of shortfall in maintenance of liquid assets, banks are liable to pay penalty @ Rs 86 per hundred thousand (Rs 100,000) or part thereof per day.
The penalty of shortfall in maintenance of liquid assets is charged by the concerned SBP: BSC (Bank) office on the basis of monthly return as per Form-IX. Furthermore, in the case of default in meeting prescribed SLR on two or more consecutive weekends, the penalty for the days during the weekends will be levied on the basis of shortfall in SLR as of the previous weekend unless the shortfall on any of the week days is specifically pointed out by the bank in Form IX (eg if there was a default in meeting SLR on the weeks ended May 8 and 15, 2004, the penalty for the days during these weekends ie from May 9 to 14 will be charged on the basis of amount of shortfall in SLR on the week ended on May 8, 2004).