The Reserve Bank of India has issued final amendments to its Basel III Liquidity Coverage Ratio (LCR) framework, changing run-off rates for certain retail and small business deposits, revising the valuation approach for Level 1 high quality liquid assets (HQLA) in the form of government securities, and clarifying the LCR treatment of deposits pledged as collateral. Retail deposits enabled with internet and mobile banking facilities will attract an additional 2.5 percentage point run-off factor, taking stable retail deposits to 7.5% and less stable deposits to 12.5%. Unsecured wholesale funding from non-financial small business customers will be treated in line with this retail-deposit approach. Government securities counted as Level 1 HQLA must be capped at current market value and adjusted for haircuts aligned with margin requirements under the Liquidity Adjustment Facility and Marginal Standing Facility. Deposits previously excluded from LCR (such as non-callable fixed deposits) will be treated as callable for LCR purposes when contractually pledged as collateral to secure a credit facility or loan. Separately, the “other legal entities” category is redefined to include deposits and other funding from banks, insurance companies, financial institutions, and entities in the business of financial services, while funding from non-financial entities (including trusts, associations of persons, partnerships, proprietorships, limited liability partnerships and other incorporated entities) will be treated as funding from non-financial corporates with a 40% run-off rate rather than 100%, unless treated as small business customers. The changes apply to all commercial banks excluding payments banks, regional rural banks and local area banks, and take effect from 1 April 2026.

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