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Date: 22-apr-2025 | By: Nuztrend Team
The Reserve Bank of India (RBI) announced significant amendments to its Liquidity Coverage Ratio (LCR) framework. The central bank directed lenders to assign an additional 2.5% run-off factor to digitally accessible retail and small business deposits, a reduction from the previously proposed 5%. This measure aims to enhance liquidity resilience in the banking sector while aligning with global standards.
The RBI's decision is anticipated to improve banks' liquidity coverage ratio by around 6 percentage points as of December-end. By easing the buffer requirements, banks will have more flexibility to lend, supporting economic growth and financial stability.
Additionally, the RBI has mandated that funding from non-financial entities like trusts and partnerships will attract a lower run-off rate of 40%, down from the current 100%. This adjustment further enhances the liquidity position of banks.
Market analysts view these measures as a positive step towards strengthening the banking sector's resilience and ensuring the smooth transmission of monetary policy.
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