Circulars/Notifications - Domestic Market & Monetary Management Department  
 DMMD Circular No. 05 of 2018

March 08, 2018 



The Presidents/ Chief Executives
All Banks


Master Circular - Statutory Liquidity Requirement

In terms of Section 29 of the Banking Companies Ordinance (BCO) 1962, banks are 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” 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 of Pakistan (SBP) from time to time.

In order to facilitate the banks, instructions issued from time to time on the subject have been consolidated in the form of master circular and are given hereunder:

A. Rate of SLR:

1. At present Banks are required to maintain the liquid assets (excluding Statutory Cash Reserve maintained under section 36(1) of the SBP Act, 1956) @19% for conventional banks and 14% for Islamic Banks/Islamic Banking Branches of their total demand liabilities and time deposits with tenor of less than one year in Pakistan.

2. Time Liabilities (excluding time deposits with tenor of less than one year) are not subject to any SLR.

3. Tenor means original fixed term of the time deposits at the time of booking and does not indicate remaining maturity period of the time deposits.

B. Applicable Liabilities for determination of SLR:

1. In terms of 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 SBP or any such liabilities as may be notified by the SBP.

2. Accordingly, the Liabilities which are subject to SLR and liabilities that are exempted from maintenance of SLR have been defined in Annexure-A.

3. For maintaining SLR, during the fortnight starting from Friday and ending on Thursday of the subsequent week, Liabilities subject to SLR as of close of business on Friday (first day of the fortnight) will be taken into account for determination of required SLR. If Friday (first day of fortnight) is a holiday, then Liabilities (subject to SLR) as of close of business on preceding working day will be taken into account.

4. The financing provided by the banks, under Microfinance Credit Guarantee Facility (MCGF) to eligible Microfinance Banks/Microfinance Institutions, shall be deductible from Liabilities (subject to SLR) of the lending institutions for the purpose of SLR calculation. This incentive will only be available for financing provided by banks before cease of MCGF by SBP in terms of AC&MFD circular no. 01 of 2017.

C. Eligible Liquid Assets for maintenance of SLR:

1. For SLR maintenance, the composition of liquid assets shall be as under:

Sr.# For Liquid Assets
a. Conventional Banks Cash including  Foreign Currency Notes held in Pakistan
Balances with SBP (In Current A/C)
PLS Term Deposit Account with SBP
Balance with National Bank of Pakistan (NBP)
Un-encumbered Approved Securities (List as per Annexure-B)
Deposits under Section13 (2) of BCO, 1962 (Capital maintained by Foreign Banks)
b. Islamic Banks(IBs)/Islamic Banking  Branches (IBBs) Cash including Foreign Currency Notes held in Pakistan
Balances with SBP (in Current A/C)
Balance with NBP in current account
Un-encumbered Approved Securities (List as per Annexure-B)
Deposits under Section13 (2) of BCO, 1962 (Capital maintained by Foreign Banks)

 

2. The bank can count the following unencumbered approved securities towards its SLR:

a. Securities held by the bank in its own accounts.

b. Securities lodged with another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of; and

c. Securities received and held by a lending bank under repurchase transaction, subject to the condition that security has no other encumbrance. The borrower under repurchase transaction will not account for the security towards SLR.

D. Maintenance of SLR on Premature withdrawal of Time Deposits:

If Time Deposits having tenor of one year and above are withdrawn prematurely before completion of one year, the bank is required to maintain additional SLR at the rate equivalent to the difference (if any) between SLR applicable on Time Deposits with tenor of less than one year and Time Deposits with tenor of one year and above. The additional SLR will be applicable on the amount of such withdrawal and for the period for which bank availed the benefit of lower SLR.

E. Monitoring of SLR:

In terms of Section 29 ibid, “Balances (of banks) with SBP” are part of liquid assets, therefore, SBP monitors maintenance of liquid assets requirement by adding SLR and CRR. For instance, currently SLR is 19% and 14% for conventional banks and IBs/IBBs respectively whereas CRR for all banks is 5%. Accordingly, SBP will monitor liquid asset requirement @ 24% and 19% for conventional banks and IBs/IBBs respectively.

F. Penalties:

In case of shortfall in maintenance of liquid assets, banks are liable to pay penalty @ Rs.86/- per hundred thousand or part thereof per day. The penalty of shortfall in maintenance of liquid assets is charged by Off-site Supervision & Enforcement Department on the basis of reporting through Reporting Chart of Accounts and/or return as per Form-IX. Reporting date to SBP will be every Friday or preceding working day if Friday is a holiday. Furthermore, in the case of default in maintenance of prescribed liquid assets on two or more consecutive reporting dates, the penalty for the working days in between the reporting dates will be levied on the basis of shortfall in maintenance of liquid assets as of the previous reporting date unless the shortfall on any of the week days is specifically pointed out by the bank in Form IX (e.g. if there was a default in maintenance of liquid assets on the consecutive reporting dates of 9th and 16th February 2018, the penalty for the working days (not holidays) during these reporting dates i.e. from 12th to 15th February will be charged on the basis of amount of shortfall in SLR on the reporting date of 9th February, 2018).

G. This will supersede all previous instructions issued on the subject matter.

 

   Yours truly,


(Muhammad Amin Khan Lodhi)
Director, DMMD




Back to Circular Page / Home Page
       
Home
About SBP
Publications
Economic Data
Press Releases
Circulars/Notifications
Laws & Regulations
Monetary Policy
Help Desk
SBP Videos
Feedback
Contact us
What's New?
Speeches
Online Tenders
Web Links

Educational Resources
Regulatory Returns
Library
Rupey ko Pehchano
Events
Zahid Husain Memorial Lecture
Careers
Sitemap
 
Best view Screen Resolution : 1024 * 768
Copyright © 2016. All Rights Reserved.