Banks get breathing space as RBI defers key proposals to next year

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Subscribe to enjoy similar stories. MUMBAI : The Reserve Bank of India (RBI) has decided to defer certain regulations for banks, with governor Sanjay Malhotra saying that the regulator will give enough time and that it does not want to cause any disruption. The decision is expected to come as a relief to bankers, who said that it would push credit growth.

A clutch of key regulations were to come into force in the next few months. These include asking banks to set aside a higher stock of liquid assets to meet a contingency like a potential bank run and a draft framework for lenders undertaking project finance with a phased increase in standard asset provisioning to 1-5% of loans from the current 0.4% on project loans. While the liquidity coverage ratio (LCR) norms were supposed to take effect on 1 April, the guidelines on project finance were supposed to take effect a day earlier, albeit in staggered form.

“I want to also clarify…we did make a mention that we will give sufficient time. I do not think 31 March 2025 is giving sufficient time. So, certainly, they will not be implemented at least before 31 March 2026," said Malhotra, who took over as the governor in December.

Malhotra said that the draft regulations were circulated, and the regulator has received comments, which it is examining. The governor reiterated that liquidity is important for everyone, but the regulations around LCR were proposed to be tightened to prevent any run on banks in India. “You would have witnessed in 2023 there was a run on some of the US banks because they do not have such regulations," he said.