Tighter LCR norms: Banks to provide feedback by August-end
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«The RBI has provided time till end-August to provide feedback on the new LCR norms and one of the areas where banks plan to give feedback is on the behavioural analysis of different kinds of deposits,» a banking industry insider said on condition of anonymity. «Banks' behavioural analysis suggests that for term deposits linked to internet banking, the propensity to abruptly withdraw funds is low,» the person said.
«Further, the new norms propose a 100% increase in run-off factors for stable, insured deposits, which seems a bit penal compared to the 50% increase for less stable deposits,» the person said.
Banks are mandated by the RBI to maintain 100% LCR, which is made up of high-quality liquid assets (HQLA), mainly consisting of government securities.
The RBI's new norms essentially translate into a greater requirement for banks to deploy more funds in HQLA, which could be quickly liquidated in a hypothetical stress episode where lenders offering internet and mobile banking facilities are faced with quick fund withdrawals or transfers.
In its draft guidelines on LCR released on July 25, the central bank said that while increased use of technology had facilitated instantaneous bank transfers and withdrawals, the new-age modes of banking had also led to a concomitant increase in risks.
The RBI said banks shall assign an additional 5% run-off
