Draft circular

RBI/2024-25/
DOR.LRG.REC. XX /03.10.001/2024-25

July 25, 2024

Madam / Dear Sir,

Draft guidelines: 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

Please refer to circular DBOD.BP.BC.No.120/21.04.098/2013-14 dated June 09, 2014 on ‘Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards’ and associated guidelines.

2. Banking has undergone rapid transformation in recent years. While increased usage of technology has facilitated the ability to make instantaneous bank transfers and withdrawals, it has also led to a concomitant increase in risks, requiring proactive management.

3. 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:

1. 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.

2. 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.

3. 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.

4. 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.

4. Accordingly, the amendments to specific instructions in the circulars dated June 09, 2014 and March 23, 2016 as above are given in Annex.

5. This circular is applicable to all Commercial Banks (excluding Payments Banks, Regional Rural Banks and Local Area Banks).

6. These instructions shall come into force with effect from April 01, 2025.

Yours faithfully,

(Usha Janakiraman)
Chief General Manager-in-Charge

¹ Internet and Mobile Banking facilities (IMB) includes all facilities such as but not limited to internet banking, mobile banking and Unified Payments Interface (UPI) which enables a customer to digitally transfer funds from their account/s.