The Reserve Bank of India today released the draft circular on ‘Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR) – Review of Haircuts on High Quality Liquid Assets (HQLA) and Run-off Rates on Certain Categories of Deposits’. Comments on the draft circular are invited from banks and other stakeholders by August 31, 2024.
The extant LCR framework for banks in India has been reviewed in light of recent developments. In order to further enhance the liquidity resilience of banks, it has been decided as under:
- Banks shall assign an additional 5 per cent run-off factor for retail deposits which are enabled with internet and mobile banking facilities (IMB)1 i.e., stable retail deposits enabled with IMB shall have 10 per cent run-off factor and less stable deposits enabled with IMB shall have 15 per cent run-off factor.
- Unsecured wholesale funding provided by non-financial small business customers shall be treated in accordance with the treatment of retail deposits as at (a) above.
- Level 1 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) described in RBI circular FMOD.MAOG No.125/01.01.001/2017-18 dated June 06, 2018 as amended from time to time.
- In case a deposit, hitherto excluded from LCR computation (for instance, a non-callable fixed deposit), is contractually pledged as collateral to a bank to secure a credit facility or loan, such deposit shall be treated as callable for LCR purposes and provisions of para 9 of circular DBR.BP.BC.No.86/21.04.098/2015-16 dated March 23, 2016 shall apply.
