Banks get a big breather on LCR, implementation from next Apr

In a big relief to banks which have been facing liquidity issues, the Reserve Bank has put off the implementation of the new a tighter liquidity coverage ratio (LCR) to April 1, 2026 apart from easing the present norms on the run-off rates to 2.5% for internet and mobile banking enabled retail and small business customer deposits and for wholesale funding from other entities to a lower 40% from 100% currently.

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The RBI move comes amidst the slowing credit growth and slower deposit accretion and had it been implemented as planned it would led to further slowdown in both liabilities and assets side, feared banking players as analysts pointed out that tighter LCR norms would have forced banks to prioritize holding high quality liquid assets and not credit growth.

The Reserve Bank had issued a draft circular on July 25, 2024 on Basel III framework on liquidity standards—liquidity coverage ratio—review of haircuts on high quality liquid assets and run-off rates on certain categories of deposits, proposing certain amendments to the LCR framework.