Mumbai, Apr 22: The RBI has issued new Liquidity Coverage Ratio (LCR) guidelines which will require a bank to assign additional run-off rates of 2.5 per cent to internet and mobile banking-enabled retail and small business customer deposits with effect from April 1, 2026.

Banks will also have to adjust the market value of Government Securities (Level 1 HQLA) with haircuts in line with margin requirements under the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF).

In addition, the final guidelines also rationalise the composition of wholesale funding from "other legal entities". Consequently, funding from non-financial entities like trusts (educational, charitable and religious), partnerships, LLPs, etc., shall attract a lower run-off rate of 40 per cent as against 100 per cent currently.

"To give the banks adequate time to transition their systems to the new standards for LCR computation, the revised instructions shall become applicable with effect from April 1, 2026," the RBI statement said.

The Reserve Bank has undertaken an impact analysis of the above measures based on data submitted by banks, as on December 31, 2024. It is estimated that the net impact of these measures will improve the LCR of banks, at the aggregate level, by around 6 percentage points as on that date. Further, all the banks would continue to meet the minimum regulatory LCR requirements comfortably. The RBI is sanguine that these measures will enhance the liquidity resilience of banks in India, and further align the guidelines with the global standards in a non-disruptive manner, according to an RBI statement.

The Reserve Bank had issued a draft circular on July 25, 2024, on "Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR) – Review of Haircuts on High Quality Liquid Assets (HQLA) and Run-off Rates on Certain Categories of Deposits". The draft circular proposed certain amendments to the LCR framework and invited comments from banks and stakeholders.

The final LCR guidelines have been issued after carefully examining this feedback, the RBI statement added.

The Liquidity Coverage Ratio is a regulatory standard developed by the Basel Committee on Banking Supervision. It requires banks to hold a buffer of High Quality Liquid Assets (HQLA) that can cover expected net cash outflows over a 30-day stress scenario.

(IANS)

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