India cenbank releases draft guidelines to boost banks' liquidity resilience

BENGALURU (Reuters) - The Reserve Bank of India on Thursday released draft guidelines aimed at bolstering the liquidity resilience of lenders amid risks involved with the increased usage of technology in banking.

"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 RBI said in the draft circular.

Among the proposed measures, banks shall assign an additional 5% run-off factor for retail deposits which are enabled with internet and mobile banking facilities.

Lenders can experience "runoff" when individuals and businesses withdraw capital to invest in other higher-paying investments, thereby reducing the bank's total capital.

In April, RBI Governor Shaktikanta Das proposed changes in the liquidity coverage ratio (LCR) framework to successfully meet liquidity risk.

LCR is a liquidity requirement for banks to maintain at all times a certain proportion of high-quality liquid assets (HQLA), including cash, reserves with central banks, and federal government bonds, which can easily be converted into cash.

The RBI has sought feedback until August-end and has proposed to implement the guidelines from April 1, 2025.

(Reporting by Chris Thomas and Swati Bhat; Editing by Mrigank Dhaniwala)