Bank of Baroda expects 12-15% impact on LCR from RBI’s new norms, says CEO

After reviewing the LCR framework for banks in India, the RBI decided that banks should assign an extra five percent runoff rate for retail deposits made via internet and mobile banking.

Bank of Baroda is expecting the Reserve Bank of India's (RBI) new draft rules on liquidity coverage ratio (LCR) to have a 12-15 percent impact on its LCR, the bank’s managing director and chief executive officer Debadatta Chand said.

The RBI's LCR framework requires banks to maintain a stock of high-quality liquid assets (HQLA) to cover expected net cash outflows over the next 30 days.

“We expect that 12-15 percent we can have on our LCR due to RBI’s draft norms. We want to maintain our LCR at 120 percent or slightly below this,” Chand said.

Currently, Bank of Baroda’s LCR stood at 138 percent as on June 30, according to a company statement.

After reviewing the LCR framework for banks in India, the RBI decided that banks should assign an extra five percent runoff rate for retail deposits made via internet and mobile banking.

This change is in line with the increased use of online banking.

The RBI's new draft rules will prove a burden during times of severe liquidity stress or when many people withdraw their funds -- both moves that can significantly affect a bank's total capital and its ability to finance such outflows.

The draft circular applies to all commercial banks, excluding payment banks, regional rural banks, and local area banks, and is proposed to take effect from April 1, 2025.

Earlier today, the lender reported 9.5 percent rise in standalone net profit at Rs 4,458 crore for the quarter ended June 30, 2024. It reported standalone net profit of Rs 4,070 crore in the year-ago period.

On July 31, the bank's shares on BSE closed 0.7 percent lower at Rs 254.50 apiece.

On sequential basis, the bank's net profit fell 9 percent.