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To avert any possible risks during the time of distress, RBI has directed banks to assign additional 2.5 per cent liquidity buffer rate to internet and mobile banking-enabled retail and small business customer deposits from April 1, 2026. Earlier in July last year, the RBI had proposed an additional 5 per cent run-off factor, which means the probability of deposits getting withdrawn/transferred, including in stressed situations. Meanwhile, as per the new guidelines, a bank shall assign an additional 2.5 per cent run-off factor for retail deposits which are enabled with internet and mobile banking facilities (IMB) i.e., stable retail deposits enabled with IMB shall have 7.5 per cent run-off factor and less stable deposits enabled with IMB shall have 12.5 per cent run-off factor (as against 5 and 10 per cent respectively, prescribed currently).

RBI, in its draft, had proposed implementation of additional run-off factor from April 1, 2025. In February this year, RBI Governor Sanjay Malhotra had indicated that the liquidity coverage ratio implementation will be deferred by at least a year. Banks covered under liquidity coverage ratio (LCR) framework are required to maintain a stock of high-quality liquid assets (HQLA) to cover the expected net cash outflows in the next 30 calendar days. In addition, the latest guidelines also rationalize the composition of wholesale funding from 'other legal entities'. Consequently, funding from non-financial entities like trusts (educational, charitable and religious), partnerships, LLPs, shall attract a lower run-off rate of 40 per cent as against 100 per cent currently.

The central bank estimates that the measure will improve banks’ LCR by around 6 percentage points at aggregate as on that date, while all banks will continue to meet the minimum regulatory LCR requirements comfortably. Further, it added that, Reserve Bank is sanguine that these measures will enhance the liquidity resilience of banks in India, and further align the guidelines with the global standards in a non-disruptive manner. The revised instructions will become applicable from April 1, 2026, to give the banks adequate time to transition their systems to the new standards for LCR computation.

Source: Ace Equity