Giving necessary relief to banks regarding imminent implementation of the proposed liquidity coverage ratio (LCR) guidelines, Governor Sanjay Malhotra said on Friday that these rules will not be applicable before 31 March, 2026. The LCR guidelines were to be implemented from 1 April. The purpose of extending this time-limit is the Reserve Bank of India (RBI) to give enough time to ensure that there is no problem in implementing the related guidelines. Malhotra said that regulator would try to balance between the cost and profit of regulation.
After the policy meeting, Malhotra said, ‘We understand that less than two months are very short for banks. Therefore, we will give at least till 31 March, 2026. This does not mean that it should be only 31 March, 2026. But we will try to implement this time limit. But we want to make it very comfortable and will be implemented in a phased manner. It will not happen that all rules come into force from day one.
In addition, Malhotra said about the potential debt loss (ECL) and the approximate finance standards, ‘ECL was only a discussion letter. Even the draft (guidelines) have not been released. Therefore, there is no time limit for the implementation of ECL guidelines. ‘ He says that banks will need more time for project funding.
According to the proposed LCR standards released in July 2024, banks will have to allocate an additional 5 percent ‘run-off factor’ for retail deposits with Internet and Mobile Banking (IMB) facilities. The run-off factor is the part of the deposits that the bank expects to withdraw in a short term of pressure.
According to the current standards, banks are mandatory to maintain 100 percent LCR. This means that the stock of high quality liquid properties (AchketuLA) should be at least equal to the total net cash withdrawal. Banks were requesting the RBI to postpone the implementation of these standards and implement them in a phased manner, especially at a time when the liquidity in the banking system has reduced significantly.
State Bank of India Managing Director Ashwini Kumar Tiwari said, ‘Banks had given feedback to RBI about LCR standards.