This can be a important enhance for banks struggling to boost deposits and can help the economic system although cheaper and extra credit score, they stated.
“With an estimated high-quality liquid belongings (HQLA) of just about ₹45-50 lakh crore for the banking system, this might release lendable assets by virtually ₹2.7-3 lakh crore and help the credit score progress of the banks,” stated Anil Gupta, ICRA’s senior vp and co-group head of economic sector scores.
RBI has mandated banks to maintain an extra 2.5% liquid belongings in opposition to retail and small deposits raised via web and cellphone banking. This ratio known as “run-off issue”. The transfer is aimed toward mitigating threat arising from a chance of considerable and fast on-line withdrawals.
The draft norms had proposed an extra 5% run-off issue for retail deposits. This was over and above the present 5% run-off issue for steady deposits and 10% run-off issue for much less steady deposits raised via digital channels.
In line with RBI’s calculations, the reported LCR of the banking system would enhance by 6 proportion factors as on December 31, 2024.
“This headroom may be equal to 1.4-1.5% of extra credit score progress potential for the banking system,” Gupta stated.
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 may be routed to credit score, relying on the general demand for loans, stated Financial institution of Baroda chief economist Madan Sabnavis. “The ultimate name shall be taken by banks relying on their inside insurance policies.”
Banks, which had been seeking to develop the share of medium-term to long-term deposits during the last couple of quarters in anticipation of stringent LCR from April this 12 months, might now tweak their deposit mobilisation technique in favour of elevating short-term deposits, which has been the pattern for a number of years, in keeping with specialists.
“From an trade standpoint, the RBI’s remaining round strikes a practical stability between liquidity and profitability. It enhances the robustness of the liquidity framework with out unduly constraining banks’ potential to lend or generate returns,” stated 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 complete financial institution deposits for all scheduled banks mixed had 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% had been within the three-to-five-year class, and 25.6% had been of greater than five-years maturity.