With deposit growth lagging credit growth, banks have reportedly requested the RBI to delay implementing the amended liquidity coverage ratio (LCR) framework, which will come into effect from April 1, 2026.
Further, they want a portion of the cash reserve ratio (CRR) to be recognised as high quality liquid assets (HQLA) for the computation of LCR.
This ask comes at a time when banks are veering towards short-term resources via bulk deposits. These deposits attract run-off rate of 100 per cent, implying that the entire deposit could be withdrawn by the depositor during a crisis, thereby affecting the statutory LCR level.
So, to offset the aforementioned impact to an extent, banks have requested the RBI to delay implementing the amended LCR framework. This framework has assigned additional run-off rates of 2.5 per cent to internet and mobile banking enabled retail and small business customer deposits.
LCR promotes short-term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient HQLAs such as cash including cash reserves in excess of required CRR and government securities in excess of the minimum Statutory Liquidity Ratio (SLR) requirement to survive an acute stress scenario lasting 30 days.
Financial stress
Effective January 1, 2019, banks are required to have minimum LCR of 100 per cent ( on an ongoing basis because the stock of unencumbered HQLA is intended to serve as a defence against the potential onset of liquidity stress.
During a period of financial stress, however, banks may use their stock of HQLA, and the LCR can fall below 100 per cent. Banks are required to immediately report to the RBI such an instance along with reasons for such usage and corrective steps initiated to rectify the situation.
The head of treasury of a private sector bank said reckoning CRR as HQLA will bolster LCR. He observed that when SLR securities (such as government securities) are included in HQLA, there is no reason why cash parked as CRR should not be included in it.
Published on February 5, 2026
