Bank of India sees 10-15 percent on its LCR from RBI’s draft norms, says MD&CEO

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.

Public sector lender Bank of India is expecting the Reserve Bank of India's (RBI) new draft rules on liquidity coverage ratio (LCR) to have a 10-15 percent impact on its LCR numbers, the bank’s managing director and chief executive officer Rajneesh Karnatak said.

“We have some calculations on the LCR draft guidelines and we see 10 to 15 percent of impact on our LCR numbers,” Karnatak said in a post results media interaction.

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.

Currently, Bank of India’s LCR stood at 120 percent as on June 30.

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.

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.

The bank on August 3 reported a 10 percent rise in its net profit to Rs 1,702.7 crore in the first quarter of the current financial year, compared to Rs 1,551 crore in the same quarter last year.

Net Interest Income (NII), a critical indicator of the bank's core income, rose 6.1 percent to Rs 6,275.8 crore, as compared to Rs 5,914 crore in the year-ago period. The non-interest income of the bank in the reporting quarter was down 11 percent to Rs 1,302 crore, as compared to Rs 1,462 crore in the year ago period.

In terms of asset quality, Bank of India reported a decline in its Gross Non-Performing Assets (NPA) ratio, which stood at 4.62% for Q1, down from 4.98% in the previous quarter. The Net NPA ratio also showed improvement, dropping to 0.99% from 1.22% quarter-on-quarter.

Provision Coverage Ratio (PCR) improved by 62 basis points (bps) on-year, as per release. PCR of the state-owned bank stood at 92.11 percent as on June 30, 2024, against 90.59 percewnt as on March 31, 2024.