
The Reserve Bank of India (RBI) has officially rolled out its final guidelines for the Liquidity Coverage Ratio (LCR) framework, bringing important updates to how Indian banks will handle liquidity management.
This new set of rules comes after a draft circular was issued in July 2024, which outlined proposed amendments to the Basel III Framework.

With these final guidelines in place, banks are now required to adjust their operations and systems to comply with the new standards starting from April 1, 2026.
What Does the New LCR Framework Mean for Banks and Customers?
In simple terms, the Liquidity Coverage Ratio (LCR) is designed to ensure that banks can meet short-term obligations even in times of financial stress.
The RBI’s revised framework aims to make banks more resilient, ensuring that they are prepared for any liquidity crises. Banks must hold enough high-quality liquid assets (HQLA), such as government bonds, that can be quickly converted into cash if needed.
This new set of guidelines refines the criteria for these assets and the rates at which they are treated in calculations.
For the average person, this means that banks will have to be more prudent about their finances, which could help protect depositors in the event of an economic downturn. It’s a safety net of sorts—a reassurance that the banking system will have enough resources to function smoothly, even during turbulent times.
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Key Highlights of the Final Guidelines
One of the biggest changes is the additional run-off rates assigned to internet and mobile banking-enabled deposits. The RBI has introduced a new 2.5% run-off rate for deposits made by retail and small business customers via digital banking platforms.
This means that, in times of stress, banks must assume a smaller portion of these deposits will be withdrawn, as compared to physical branch deposits.
Moreover, government securities, which are classified as Level 1 HQLA, will now be subject to haircuts in line with margin requirements under the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF).
This will ensure that the value of these assets in the LCR calculation reflects their actual market value more accurately.
Another notable change involves wholesale funding from “other legal entities,” which will now be treated with lower run-off rates. Previously, funding from non-financial entities like trusts or partnerships was considered to be more volatile, so it attracted a 100% run-off rate.
Under the new guidelines, however, these types of deposits will be subject to a much lower rate of 40%, making it easier for banks to meet LCR standards without a major disruption to their operations.
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Why These Changes Matter
While these updates might seem like bank-talk, they have significant implications for both banks and their customers. For the banks, these changes aim to enhance liquidity resilience without creating major disruptions.
The changes provide a more flexible approach, which allows banks to weather liquidity challenges better.
For the everyday consumer, the changes will likely mean greater financial stability. If a crisis ever strikes, customers can rest assured that their deposits are safer, and banks will be able to operate without scrambling for cash. In a way, it’s like a financial seatbelt—hopefully, you never need it, but it’s good to know it’s there when you do.
The Transition Period and What’s Next?
The RBI has given banks a substantial transition period to adapt to these new standards. The guidelines are set to be fully implemented by April 1, 2026, giving banks time to adjust their systems and procedures for LCR computation.
This timeline ensures that the shift to the new rules will be gradual, avoiding any shock to the banking sector.
Conclusion: A Step Toward Global Standards
With these final guidelines, the RBI is aligning India’s banking practices more closely with global standards.
These adjustments help strengthen the financial system and improve the overall stability of the banking sector. As banks adapt to these new standards, the resilience of India’s financial system will be further enhanced, benefiting both financial institutions and their customers.