LCR Norms Deferred: RBI Delays Liquidity Coverage Ratio
Why in the news
The RBI delayed the proposed Liquidity Coverage Ratio (LCR) rules to give banks time, and left ECL and project finance norms without a fixed date.
About LCR
- A BCBS-backed measure of whether a bank can meet short-term liabilities under stress lasting 30 days.
- Required level: 100% or more.
- HQLA are assets quickly turned into cash, such as cash at the central bank and government bonds.
- Net cash outflows are expected outflows minus inflows over the 30-day stress period.
| Item | Example |
|---|---|
| HQLA | ₹500 crore |
| Total net cash outflows | ₹400 crore |
| LCR = 500/400 x 100 | 125% |
What RBI announced
- LCR shifts from 1 April 2025 to 31 March 2026 or later, for a phased rollout; banks had sought time as system liquidity was tight.
- The ECL framework is still under discussion with no draft; big IT overhauls may take about 6-12 months.
- Project finance norms will follow ECL guidelines for a balanced approach.
Significance
- Helps banks withstand shocks, protects the real economy from financial instability and builds resilience.
Exam angle
- Formula: LCR = HQLA / Total net cash outflows x 100.
- Stress horizon: 30 days; minimum LCR: 100%.
- Related terms: HQLA, ECL, BCBS.