Blitz Bureau
Mumbai, April 22 – The Reserve Bank of India (RBI) has released revised guidelines for the Liquidity Coverage Ratio (LCR), set to take effect from April 1, 2026. The changes are aimed at enhancing the liquidity resilience of Indian banks and bringing domestic regulations closer to global standards.
Under the new framework, banks will be required to assign an additional run-off rate of 2.5% on deposits from retail and small business customers that are accessible via internet and mobile banking. This change reflects the higher likelihood of withdrawal associated with digital access to funds.
Additionally, banks will need to apply haircuts to the market value of Government Securities classified as Level 1 High Quality Liquid Assets (HQLA). These haircuts must align with the margin requirements under the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF).
The guidelines also revise the treatment of wholesale funding from non-financial legal entities. Deposits from entities such as educational, charitable, and religious trusts, as well as partnerships and LLPs, will now be subject to a lower run-off rate of 40%, down from the current 100%.
To facilitate a smooth transition, the RBI has provided a lead time until April 1, 2026, for banks to update their systems and processes in line with the new standards.
The central bank conducted an impact analysis based on data as of December 31, 2024. The findings suggest that the revised norms would result in a net improvement of approximately 6 percentage points in the aggregate LCR across banks. Importantly, all banks are expected to continue meeting the minimum regulatory LCR requirements comfortably.
The final guidelines follow the RBI’s draft circular issued on July 25, 2024, which had proposed updates to the LCR framework and sought feedback from stakeholders. The final rules incorporate inputs received during the consultation process.
The LCR is a key component of the Basel III liquidity standards and requires banks to maintain a buffer of high-quality liquid assets sufficient to cover net cash outflows over a 30-day stress period.
