The Reserve Bank of India (RBI) had released a draft for changes to the Liquidity Coverage Ratio (LCR) rules on July 25, 2024.
After seeking feedback from banks and stakeholders, these changes have been finalized.
Key Changes Under the New Rules
2.5% Additional Run-off Rate:
Banks will now have to apply an additional 2.5% run-off rate on retail and small business accounts linked to internet and mobile banking.Government Securities Valuation:
The valuation of Government Securities will now require haircuts based on the margin requirements set under LAF (Liquidity Adjustment Facility) and MSF (Marginal Standing Facility).Reduced Run-off Rate for Non-Financial Entities:
The run-off rate on funding from non-financial entities like educational, religious, and charitable trusts, as well as partnership firms and LLPs, will be reduced from 100% to 40%.
Impact of These Changes
Based on data from banks up to December 31, 2024, RBI estimates that these changes will increase the overall LCR level of banks by about 6%.
Banks are expected to easily meet the required LCR norms, which will strengthen their liquidity and bring them in line with international standards.
Time to Adapt
Banks have been given sufficient time to adjust to these new rules, which will come into effect from April 1, 2026.
