Since late nineties, banks’ holding of G-Sec have been far in excess of the reserve requirement with ratio going up to near 42 per cent of net demand and time liabilities. Banks progressively off-loaded excess investment in SLR securities from 2004-05 onward in view of the strong credit demand.
Importantly, since April 2006, Reserve Bank does not participate in the primary segment of the G-Sec market that not only provide leeway to RBI in implementing monetary policy, the pricing of Government securities has also become far more market oriented.