RBI Mulls Liquidity Norms With More Buffers For Electronic Fund Transfers

The Reserve Bank of India on Thursday has proposed new draft guidelines requiring banks to maintain additional liquidity buffers for accounts with internet and mobile banking facilities.

The move aims to mitigate risks during periods of financial stress, following Governor Shaktikanta Das' April policy review, highlighting the heightened use of digital banking tools for fund transfers and withdrawals.

The draft circular seeks to amend guidelines issued in 2014 under the Basel-III Framework on Liquidity Standards, Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools, and LCR Disclosure Standards.

"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," the draft circular said.

The draft suggests banks shall assign an additional 5% run-off factor for retail deposits, which are enabled with IMB facilities, wherein stable retail deposits enabled with IMB shall have 10% run-off factor, and less stable deposits enabled with IMB shall have 15% run-off factor, the draft said.

It added that unsecured wholesale funding provided by non-financial small business customers shall be treated in accordance with the treatment of retail deposits.

The draft also said if a deposit hitherto excluded from LCR computation like 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.

Apart from this, it proposes that 'Level 1' high quality liquid assets 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 and Marginal Standing Facility, it said.

The circular will be applicable to all commercial banks, excluding payments banks, regional rural banks, and local area banks, it said, adding that it will be applicable from April 1, 2025.

Comments on the draft circular from the public are invited by Aug. 31, it said.

(With inputs from PTI)