- 25 Apr 2025
- ICICIdirect Research
RBI TONED-DOWN LCR NORMS: BOOST TO LIQUIDITY AND CREDIT GROWTH
After indicating extension of 1 year for implementation of LCR norms, RBI has released revised LCR (Liquidity Coverage Ratio) norms on April 21st, 2025, mandating 2.5% additional run-off for IMB-enabled retail deposits (vs. 5% proposed earlier) and lowering run-off for non-financial entities wholesale deposits from 100% to 40%, effective from April 2026.
Thus, this is a softer version of the July 2023 draft, which proposed 5% hike (i.e., from 5% to 10% for stable deposit, and from 10% to 15% for less stable IMB deposits) to be implemented from April 2025.
While additional run-off on retail deposit pose pressure on liquidity, reduction in run-off on wholesale deposit will more than offset the pressure, providing additional liquidity. Overall, the new norm is expected to improve LCR of industry by ~600 bps, thus freeing up ₹2.7–₹3 lakh crore, in lendable resource. This headroom implies incremental credit growth of 1.4–1.5% for the banking system.
While lenders including Axis Bank and RBL Bank are poised to witness relatively higher benefit amid higher proportion of wholesale funding, lower run-off and better liquidity deployment is seen to benefit HDFC Bank.