RBI Revises Liquidity Coverage Ratio Guidelines

On 22nd April 2025, the Reserve Bank of India (RBI) released updated guidelines for the Liquidity Coverage Ratio (LCR), with significant changes set to take effect from 1st April 2026, aiming to enhance banks' liquidity resilience.

Key Points

New Run-Off Rate: A 2.5% additional run-off rate mandated for retail and small business deposits made via internet and mobile banking.
Haircuts on G-Secs: Government Securities (Level 1 HQLA) to be valued after applying LAF and MSF-related haircuts.
Wholesale Funding Reform: Run-off rate for non-financial legal entities like trusts, LLPs, and partnerships reduced to 40% from 100%.
Implementation Timeline: Banks given until 1^st April 2026, to adjust systems and comply with new LCR standards.
Positive Impact Forecast: Aggregate LCR of banks projected to improve by 6 percentage points based on Dec 2024 data.
Global Alignment: Changes align India’s liquidity norms more closely with Basel III global standards.
Stakeholder Input: Final norms shaped by feedback on draft guidelines issued in July 2024.