The Reserve Bank of India (RBI) on Thursday released draft guidelines aimed at bolstering the liquidity resilience of banks amid the increased usage of technology.
“Banking has undergone rapid transformation in recent years. While increased usage of technology has facilitated the ability to make instantaneous bank transfers and withdrawals, it has also led to a concomitant increase in risks, requiring proactive management,” RBI said in its circular.
Among the proposed measures, banks shall assign an additional 5% run-off factor for retail deposits which are enabled with internet and mobile banking facilities.
The apex bank in its circular said the banks shall assign an additional 5% 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 10% run-off factor and less stable deposits enabled with IMB shall have 15% run-off factor.
It further said that the unsecured wholesale funding provided by non-financial small business customers shall be treated in accordance with the treatment of retail deposits as mentioned above.
Level-1 Haircuts on High Quality Liquid Assets (HQLA) in the form of Government securities shall be valued at an amount not greater than their current market value, adjusted for applicable haircuts in line with the margin requirements under the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF), it said.
RBI said that these instructions shall come into force with effect from April 1, 2025.
In April, RBI Governor Shaktikanta Das proposed changes in the liquidity coverage ratio (LCR) framework to successfully meet liquidity risk.
LCR is a liquidity requirement for banks to maintain at all times a certain proportion of high-quality liquid assets (HQLA), including cash, reserves with central banks, and federal government bonds, which can easily be converted into cash.
The RBI has sought feedback until August-end.
