IndusInd Bank forecasts 4-6% impact from RBI's new draft LCR norms

This change is in line with the increased use of online banking, where customers can transfer funds without visiting a bank branch

IndusInd Bank expects Reserve Bank of India's (RBI) new draft rules on liquidity coverage ratio (LCR) to have a 4-6 percent impact on its LCR, as these rules require banks to assign an extra 5 percent runoff rate to deposits made via internet and mobile banking.

In an earnings call, IndusInd Bank said they anticipate a 4-6 percent impact, but assured it will be "business as usual".

"When the regulator issues draft guidelines, a lot of thought goes into them. We believe they want to ensure banks remain liquid and recognise that deposits made through mobile or electronic transfers can be easily moved. These guidelines are aimed in the right direction and will make the system more secure. We should not be worried about this and expect it to be business as usual," the management said.

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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. After reviewing the LCR framework for banks in India, the RBI decided that banks should assign an extra 5 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 important 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.