This can be a vital increase for banks struggling to lift deposits and can help the financial system although cheaper and extra credit score, they mentioned.
“With an estimated high-quality liquid property (HQLA) of virtually ₹45-50 lakh crore for the banking system, this might unencumber lendable assets by nearly ₹2.7-3 lakh crore and help the credit score progress of the banks,” mentioned Anil Gupta, ICRA’s senior vp and co-group head of monetary sector scores.
RBI has mandated banks to maintain a further 2.5% liquid property in opposition to retail and small deposits raised by means of web and cellphone banking. This ratio is known as “run-off issue”. The transfer is geared toward mitigating threat arising from a probability of considerable and fast on-line withdrawals.
The draft norms had proposed a further 5% run-off issue for retail deposits. This was over and above the prevailing 5% run-off issue for steady deposits and 10% run-off issue for much less steady deposits raised by means of digital channels.
Based on RBI’s calculations, the reported LCR of the banking system would enhance by 6 proportion factors as on December 31, 2024.
“This headroom could be equal to 1.4-1.5% of extra credit score progress potential for the banking system,” Gupta mentioned.
Financial institution credit score grew 11% year-on-year to Rs 18.2 lakh crore as on April 4, 2025.
As LCR of banks would enhance by 6 proportion factors, intuitively this saving could be routed to credit score, relying on the general demand for loans, mentioned Financial institution of Baroda chief economist Madan Sabnavis. “The ultimate name might be taken by banks relying on their inside insurance policies.”
Banks, which have been trying to develop the share of medium-term to long-term deposits over the past couple of quarters in anticipation of stringent LCR from April this 12 months, could now tweak their deposit mobilisation technique in favour of elevating short-term deposits, which has been the pattern for a number of years, in response to consultants.
“From an business standpoint, the RBI’s last round strikes a realistic stability between liquidity and profitability. It enhances the robustness of the liquidity framework with out unduly constraining banks’ potential to lend or generate returns,” mentioned Virat Sunil Diwanji, Federal Financial institution’s nationwide head for shopper banking. “The revised framework additionally aligns higher with the evolving deposit panorama, particularly in mild of rising digitalisation and adjustments in depositor behaviour.”
RBI information confirmed that 39.8% of whole financial institution deposits for all scheduled banks mixed have been within the less-than-one-year bucket as of March 2024. Deposits with maturity between one 12 months to as much as three years constituted 24.7%, whereas 9.9% have been within the three-to-five-year class, and 25.6% have been of greater than five-years maturity.
