Heavyweight banking stocks like Kotak Mahindra Bank, HDFC Bank, State Bank of India rose 2% on April 22 after brokerages viewed new RBI norms on liquidity coverage ratio (LCR) as a positive for lenders.
On April 21, Reserve Bank of India has announced amendments to LCR framework giving banks more flexibility in managing funds. The amendments will come into force on April 1, 2026.
RBI had directed lenders to assign a lower-than-proposed buffer rate of 2.5% on digitally linked deposits, with a one-year compliance deadline.
The net impact of these measures will improve banks' liquidity coverage ratio as on December-end by around 6 percentage points, the Reserve Bank of India said in a release.
Here's what brokerages are saying:
"RBI has eased LCR norms with lower run-off on deposits from 100% to 40%. This will release liquidity of 60% equating to Rs 3-3.5 lakh crore. Benefits for banks may vary, PSU banks, old and large private bks may gain more," said global brokerage Jefferies.
Macquarie said RBI's expectation of a 600 bps improvement in LCR ratios for the banking system compared to Q3FY24 levels is encouraging. "Improving liquidity to support 140-160 bps increase in credit growth. Back of the envelope calculations indicates a Rs 2.5-3 lakh crore increase in credit liquidity. Move is welcome in the current environment where loan growth is relatively weak," said the brokerage.
"RBI LCR norms will help banks that have granular wholesale deposits and high share of retail deposits. Large private sector banks and PSU banks will benefit the most," Pranav Gundlapalle of Bernstein told CNBC-TV18.
At 11:20 am on April 22, Bank Nifty was trading 1%, or 570 points, higher at 55,875. Canara Bank shares were the top gainer at 3%, followed by Bank of Baroda, Kotak Mahindra Bank, and HDFC Bank with 2.7%, 2% and 2% gains, respectively.
The RBI also said banks will have to adjust the market value of bonds by applying haircuts, or valuation adjustments, which are in line with those applicable under the central bank's liquidity facilities.
Funding from non-financial entities, such as trusts and partnerships, shall attract a lower run-off rate of 40% as against 100% currently, the RBI said.
The RBI 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 added.
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