The Reserve Bank of India mandates a 2.5% additional run-off factor for internet and mobile banking-enabled retail and small business deposits, effective April 1, 2026, to bolster liquidity resilience amid digital banking risks.
The Reserve Bank of India (RBI) on Monday directed banks to assign additional 2.5 per cent liquidity buffer rate to internet and mobile banking-enabled retail and small business customer deposits from April 1 next year to stave off any possible risks during times of stress.
In July last year, the RBI had proposed an additional 5 per cent run-off factor, which means the probability of deposits getting withdrawn/transferred, including in stressed situations.
The revised framework, in the works for almost a year, also comes against the backdrop of instances in some foreign jurisdictions where during financial stress, depositors quickly withdrew or transferred funds using digital banking channels.
From April 1, 2026, banks will have to assign an additional 2.5 per cent run-off factor for retail deposits which are enabled with internet and mobile banking facilities (IMB), an RBI circular said.
The RBI said the decision follows stakeholders' feedback on draft guidelines on 'Basel-III Framework on Liquidity Standards -- Liquidity Coverage Ratio (LCR) -- Review of Haircuts on High Quality Liquid Assets (HQLA) and Run-off Rates on Certain Categories of Deposits' issued last July.
"A bank shall assign an additional 2.5 per cent run-off factor for retail deposits which are enabled with internet and mobile banking facilities (IMB) i.e., stable retail deposits enabled with IMB shall have 7.5 per cent run-off factor and less stable deposits enabled with IMB shall have 12.5 per cent run-off factor (as against 5 and 10 per cent respectively, prescribed currently)," as per the latest guidelines.
The draft guidelines had earlier suggested that banks should assign an additional 5 per cent run-off factor for retail deposits, which are enabled with IMB facilities, wherein stable retail deposits enabled with IMB shall have 10 per cent run-off factor and less stable deposits enabled with IMB shall have 15 per cent run-off factor.
The draft had proposed implementation of additional run-off factor from April 1, 2025. In February this year, RBI Governor Sanjay Malhotra had indicated that the liquidity coverage ratio implementation will be deferred by at least a year.
Banks covered under liquidity coverage ratio (LCR) framework are required to maintain a stock of high quality liquid assets (HQLA) to cover the expected net cash outflows in the next 30 calendar days.
In addition, the latest guidelines also rationalise the composition of wholesale funding from 'other legal entities'.
Consequently, funding from non-financial entities like trusts (educational, charitable and religious), partnerships, LLPs, shall attract a lower run-off rate of 40 per cent as against 100 per cent currently.
The RBI had undertaken an impact analysis of the measures based on data submitted by banks, as on December 31, 2024.
"It is estimated that the net impact of these measures will improve the LCR of banks, at the aggregate level, by around 6 percentage points as on that date," the RBI said.
Further, all banks will continue to meet the minimum regulatory LCR requirements comfortably.
"Reserve Bank is sanguine that these measures will enhance the liquidity resilience of banks in India, and further align the guidelines with the global standards in a non-disruptive manner," it said.
To give the banks adequate time to transition their systems to the new standards for LCR computation, the revised instructions will become applicable from April 1, 2026, the central bank added.
Internet and Mobile Banking facilities (IMB) includes all facilities such as but not limited to internet banking, mobile banking and Unified Payments Interface (UPI) which enables a customer to digitally transfer funds from their account/s.