If the proposed liquidity coverage ratio (LCR) norms go into effect on April 1, private sector lender IDBI Bank may consider raising interest rates on non-callable deposits by 10 to 25 basis points, according to a senior executive. 

While banks have asked the RBI to implement the LCR norms gradually, the RBI has not deferred the implementation date and has instead requested more data from banks on where they stand in terms of LCR and what the impact would be if the norms were implemented on April 1.

In July 2024, the RBI proposed imposing a 5% additional run-off factor on both stable and less stable retail deposits with internet and mobile banking facilities.  

Run-offs occur when individuals or businesses withdraw deposits that were not anticipated by banks. 

The suggested guidelines state that less stable retail deposits will have a 15% run-off factor, while stable retail deposits made through internet and mobile banking will have a 10% run-off factor. According to current standards, banks must keep their liquidity coverage ratio at 100%.

This implies that the total net cash outflow must be at least equal to the stock of high-quality liquid assets (HQLA). By guaranteeing that banks have sufficient HQLAs to endure a 30-day acute stress scenario, the LCR helps banks become more resilient in the short term to possible liquidity disruptions.

Additionally, Level 1 HQLA in the form of government securities must be valued at no more than their current market value, adjusted for applicable haircuts in compliance with the margin requirements under the Marginal Standing Facility (MSF) and Liquidity Adjustment Facility (LAF), according to the proposed norms.