Newly appointed RBI Governor Sanjay Malhotra said that the central bank will implement the new Liquidity Coverage Ratio norms in phases, but not before March 31, 2026.
In a post-policy press conference with reporters, Malhotra said that RBI is revising the estimates and impact analysis on draft LCR norms. "We do not want to cause disruption," he added.
NDTV Profit had reported in January that RBI had reached out to banks to understand the impact of its new liquidity coverage norms, which were to come into effect from April 1.
In July 2024, the RBI had proposed to tighten LCR norms by increasing the run-off factor for retail deposits. This action was taken keeping in mind the rising number of mobile and internet banking users.
The new draft rules were proposed to impose an additional run-off factor of 5% on both stable and less stable retail deposits that are enabled with internet and mobile banking facilities. This means they will have to set aside more money against their retail deposits.
Run-off events are when individuals or businesses withdraw their deposits in large numbers, which are not anticipated by banks.
The current norms ask banks to maintain a 100% LCR, indicating that stock of high-quality liquid assets should be at least equal to total net cash outflows. LCR promotes the short-term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient high quality liquid assets to survive an acute stress scenario lasting for 30 days.
Having higher LCR needs will mean that banks will have to buy more government securities, as they qualify as high quality liquidity assets.
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