RBI has issued draft guidelines on Liquidity Coverage Ratio (LCR). The regulator has asked banks to set aside a higher stock of liquid securities as a buffer on deposits amidst risk involving increased use of technology to transfer funds.
- The draft guidelines will be effective from FY25. RBI has proposed to impose an additional run-off factor of 5 per cent on both stable and less stable retail deposits that are enabled with internet and mobile banking facilities.
- Run-offs are when individuals or businesses withdraw their deposits, which are not anticipated by banks.
- Currently, banks are required to maintain an LCR of 100%. LCR norms require banks to maintain a stock of high-quality liquid assets (HQLA), primarily government securities, to tide over a hypothetical 30-day stress scenario in which deposit outflows occur.
- The guidelines mandate banks to keep a higher liquidity for deposits made through digital channels, as they aren’t very stable and tend to be withdrawn quickly.
- It has asked banks to assign a higher run-off factor of 10% on retail deposits made via Internet and Mobile banking (IMB), from the current 5%. Typically, the run-off factor on retail deposits is lower as these are considered stable.
