Mumbai:Â The Reserve Bank of India (RBI) has finalised changes to the Liquidity Coverage Ratio (LCR) framework, introducing stricter treatment for digital deposits and offering relief on certain wholesale funding norms. The move, effective from April 1, 2026, aims to enhance the liquidity resilience of banks while aligning Indian regulations with global standards.
Higher Run-Off for Digital Deposits
Under the new guidelines, banks must apply an additional 2.5% run-off rate to deposits from retail and small business customers who use internet and mobile banking platforms. This adjustment reflects RBI’s growing concern over the potential volatility of digital deposits during financial stress. The regulator’s decision follows a detailed feedback process with banks and stakeholders, as well as a data-based impact analysis using figures as of December 31, 2024.
Trust and Non-Financial Entity Funding Gets Cheaper
In a shift aimed at rationalising wholesale funding costs, RBI has reduced the run-off rate for deposits from non-financial legal entities, including charitable trusts, educational institutions, partnerships, and LLPs — from 100% to 40%. This change is expected to reduce funding pressure on banks from these segments and increase the stability of such liabilities.
Haircuts on Government Securities Aligned with LAF, MSF
Banks will also be required to apply valuation haircuts to Level 1 High Quality Liquid Assets (HQLA), such as Government Securities, in line with existing margins under the Liquidity Adjustment Facility (LAF) and the Marginal Standing Facility (MSF). This move standardises liquidity treatment across frameworks and is likely to affect the reported value of banks’ HQLA portfolios.
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