Incidentally, I would like to mention here that Indian banks have traditionally preferred to maintain SLR, over and above the statutory minimum. As you all know, we have softened the impact of both SLR and LCR having to be maintained by introducing the concept of FALLCR. 1 The 2 per cent MSF 2 also reduces the impact.
One good thing is that the FALLCR concept has passed the RCAP review and therefore this can be a possible tool to reduce the impact of SLR and LCR running parallel as the minimum required LCR moves up. With the current levels of SLR assets held by banks, the joint LCR and SLR requirements is not becoming a binding constraint.