MONEY
RBI lowers buffer rate to 2.5% for digitally-linked deposits, providing banks a breather
- IBJ Bureau
- Apr 22, 2025
The Reserve Bank of India (RBI) on Monday directed lenders to assign a lower-than-proposed buffer rate of 2.5 per cent on digitally-linked deposits, with a one-year compliance deadline, marking the latest in its ongoing regulatory easing.
The net impact of these measures will improve banks’ liquidity coverage ratio as on December-end by around 6 percentage points, the RBI has said in a release.
All banks would also continue to meet the minimum regulatory LCR requirements “comfortably”, the central bank has added.
The RBI in July has proposed that banks set aside an additional 5 per cent ‘run-off factor’ on digitally-accessible retail deposits to better manage risks in case of quick and heavy withdrawals via internet or mobile banking.
Lenders can experience run-off when individuals and businesses withdraw capital to invest in other higher-paying investments, thereby reducing the banks’ total capital.
The Indian Banks’ Association had urged the RBI to lower run-off to 2 to 3 per cent to avoid a hit to lenders’ liquidity.
The norms will be applicable from April 1, 2026, a year later than what was proposed earlier.
The RBI has also said that banks will have to adjust the market value of bonds by applying haircuts, or valuation adjustments, which are in line with those applicable under the central bank’s liquidity facilities.
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