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Given the technology advancement in the banking sector, instant transactions in the form of bank transfers and withdrawals has led to increased risk that requires oversight. With an aim to enhance the liquidity resilience of banks, the LCR framework has been reviewed, and certain requirements26 These requirements inter alia include: • Banks should assign an additional five per cent run-off factor for retail deposits which are enabled with Internet and Mobile Banking facilities. • Unsecured wholesale funding provided by non-financial small business customers should be treated in accordance with the treatment of retail deposits mentioned above. • Level 1 High Quality Liquid Assets (HQLA) in the form of government securities should be valued at an amount not greater than their current market value, adjusted for applicable haircut in line with the margin requirements under the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF). In case a deposit, excluded from LCR computation (for instance, 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. are proposed to be made effective from 1 April 2025 to all commercial banks (excluding payment banks, regional rural banks and local area banks).

The comment period for this draft circular ends on 31 August 2024.

To access the text of the draft circular, please click here

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