BSD Circular No.4 of 2004

In terms of Section 29 of the Banking Companies Ordinance, 1962 (BCO), every banking company and financial institution specified in Section 3A 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” 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.

2) In exercise of the powers vested upon the State Bank of Pakistan under the above provision of law, it has been decided that henceforth all the Development Financial Institutions shall maintain SLR @15% of their Total Time & Demand Liabilities in the form of liquid assets (excluding Cash Reserve maintained @1% of their TDL) as enumerated under Section 29 of the BCO. Moreover, they will continue to maintain Cash Reserve (CRR) with State Bank of Pakistan @ 1% of their Demand & Time Liabilities.

3) The Total Time and Demand Liabilities (TDL) for the purpose of SLR and CRR shall be determined by excluding the following items:

i) Total Equity including Paid-up Capital, Reserves and un-appropriated profit/ (Loss)
ii) Borrowings from Banks and DFIs
iii) Borrowings from State Bank of Pakistan
iv) Deposits from Banks and DFIs

All liabilities, except those specifically listed above, shall 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. A list of eligible securities for maintaining SLR is included as Annexure A.

4) 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) alongwith its break up in their weekly statement of liquidity.

5) PIBs are eligible approved security for SLR purposes only to the extent of 5% 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 upto December 31, 2005.

6) All the DFIs are required to furnish to the State Bank a weekly Statement of Liquidity Position as per Annexure-B (to be called as Statement No.2), 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.

7) Rate of penalty in case of default in maintenance of SLR is Rupees 86 per Rupees hundred thousand or part thereof per day.

8) For SLR purpose, TDL would be calculated on weekly basis which will be applicable from the date of the weekend i.e. 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.

9) The above instructions shall supersede the existing NBFIs Rule 6 on the subject, and shall come into force w.e.f 1st January, 2005. All DFIs shall henceforth report their SLR as per Statement No.2 (Annexure B) and shall regularize their position in accordance with these instructions before expiry of this transitory period i.e. by 31st December, 2004.

Name of DFI
Return for the week ended
Liquidity Requirement A- Total Liabilities	Amount (Rs in thousand)
LESS 1) Paid up Capital, Reserves and unappropriated Profit/(Loss)
2) Borrowings from Financial Institutions
3) Deposits from Financial Institutions
4) Borrowings from State Bank of Pakistan
5) F.E 25 Deposits
B-Total (1 to 5)
C-Net Time & Demand Liabilities (Net TDL) A-B:
Requirements: D- Cash Reserve with SBP (1% of C)
E-Liquidity-(15% of C)
2)-Details of Liquid Assets Maintained
a) Un-encumbered Approved Government Securities'*
b) NIT Units
c) Cash in Pakistan (including Foreign Currency)
F-Total(a+b+c)
G- Cash Balance with SBP (on account of 1%)
H-Excess/ (Short): • Cash Reserve with SBP (G-D) • Liquidity (F-E)
3)-Position In Respect Of F.E.25 Deposits.
I-.F.E.25 Deposits in US$
		Required	Maintained
• 5% Cash Reserve Account in US$
• 15% Special Cash Reserve Account (in US$)
• Cash Reserve Account Excess/ (shortfall)
• Special Cash Reserve Account Excess/ (shortfall)