RBI Tightens Banks' LCR Norms PDF

. RBI to tighten banks’ LCR norms Releases draft guidelines, proposes additional 5% ‘run-off’ factor on retail deposits MANOJIT SAHA At a time when credit growth has Mumbai, 25...

. RBI to tighten banks’ LCR norms Releases draft guidelines, proposes additional 5% ‘run-off’ factor on retail deposits MANOJIT SAHA At a time when credit growth has Mumbai, 25 July SECURING DEPOSITS been consistently higher than deposit growth, these norms could put further I n view of the rising number of Additional run-off Less stable deposits pressure on lenders regarding resource mobile and internet banking users, factor for retail deposits enabled with IMB to mobilisation, bankers said. The RBI has the Reserve Bank of India (RBI) has enabled with internet have 15% run-off factor been nudging banks to moderate their proposed to tighten norms related to and mobile banking Run-offs are when credit-deposit ratio in view of lagging the liquidity coverage ratio (LCR) by facilities growth of liabilities. individuals or increasing the run-off factor for retail It is proposed that the new norms Stable retail deposits businesses withdraw deposits. “Banking has undergone rapid would come into effect from April 1, transformation in recent years. While enabled with IMB to deposits which are not 2025. Comments on the draft circular increased usage of technology has facil- have 10% run-off factor anticipated by banks are invited from banks and other stake- itated the ability to make instantaneous holders by August 31. bank transfers and withdrawals, it has will have a 10 per cent run-off factor, should be at least equal to total net cash “Overall, this will pose requirements also led to a concomitant increase in and less stable deposits will have a 15 outflows. The LCR promotes the short- for higher liquid assets (G-secs) for the risks, requiring proactive manage- per cent run-off factor. The run-off fac- term resilience of banks to potential liq- banks to shore up their LCRs, which will ment,” the RBI said in the draft guide- tor is much higher, for example, from uidity disruptions by ensuring that they be adversely impacted by the guide- lines released on Thursday. deposits from non-financial corporates. have sufficient HQLAs to survive an lines. The proposed changes are posi- The regulator has proposed to “Unsecured wholesale funding pro- acute stress scenario lasting for 30 days. tive for strengthening the liquidity posi- impose an additional run-off factor of 5 vided by non-financial small business The draft norms said Level 1 HQLA tion of the banks and banks are likely per cent on both stable and less stable customers shall be treated in accor- in the form of government securities to build up the G-sec in run-up to the retail deposits that are enabled with dance with the treatment of retail should be valued at an amount not implementation of these guidelines, internet and mobile banking facilities. deposits,” the norms said. greater than their current market value, which will aid in achieving regulatory Run-offs are when individuals or Current norms mandate banks to adjusted for applicable haircuts in line directives of moderating credit-to- businesses withdraw their deposits, maintain a 100 per cent liquidity cov- with the margin requirements under deposit ratio of banks,” said Anil Gupta, which are not anticipated by banks. erage ratio. This means the stock of the Liquidity Adjustment Facility (LAF) senior vice president and co-group head Stable retail deposits enabled with IMB high-quality liquid assets (HQLA) and Marginal Standing Facility (MSF). (financial sector ratings), ICRA.