RBI Eases LCR Norms: Lower Run-Off for Digital Deposits
Why in the news
The RBI softened its draft Liquidity Coverage Ratio rules, lowering how much liquid assets banks must park against certain deposits, which should free funds for lending.
Key facts
- Effective date: April 1, 2026, giving banks time to adjust systems.
- Stable retail deposits (internet/mobile banking): run-off 7.5%, against 10% in the draft.
- Less stable digital deposits: 12.5%, up from 10% today but below the 15% proposed.
- Trusts, partnerships, LLPs: run-off lowered from 100% to 40%, freeing high-quality liquid assets (HQLAs).
Run-off changes
| Deposit type | Earlier / draft | Final |
|---|---|---|
| Stable retail digital | 10% (draft) | 7.5% |
| Less stable digital | 10% now; 15% proposed | 12.5% |
| Non-financial entities (trusts, LLPs) | 100% | 40% |
Expected impact
- System-wide LCR up by roughly 6 percentage points.
- About ₹2.7-3.0 lakh crore of lendable resources released; credit growth lifted by 1.4-1.5%.
- Another estimate: ₹4 trillion unlocked from ₹10 trillion held in non-financial entity deposits.
- SBI, HDFC Bank and ICICI Bank seen as main gainers; ICRA and other analysts see positive effects.
Background
- The tighter treatment of digital deposits reflects lessons from the Silicon Valley Bank collapse, triggered by a digital bank run.
- Banks had objected to the strict draft; they welcomed the final version.
Exam angle
- LCR: liquid assets banks must hold against expected outflows; run-off factor: assumed withdrawal rate.
- Implementation date: April 1, 2026.