RBI Draft Guidelines Propose Additional Liquidity Buffers for IMB Accounts

The Reserve Bank of India (RBI) released draft guidelines recommending banks to add additional liquidity buffers for accounts with internet and mobile banking (IMB) facilities to mitigate risks during stress periods. The guidelines suggest additional run-off factors for retail deposits and propose valuation adjustments for 'level 1' high-quality liquid assets.

The Reserve Bank of India (RBI) has unveiled draft guidelines to introduce additional liquidity buffers for accounts having internet and mobile banking (IMB) facilities. Aimed at mitigating risks during periods of financial stress, this move comes after Governor Shaktikanta Das highlighted the heavy reliance on technological tools in banking during the April policy review.

The draft guidelines point out that while technology has simplified instantaneous bank transfers and withdrawals, it has also increased associated risks, necessitating robust risk management strategies. Specifically, the guidelines call for banks to assign an additional 5 per cent run-off factor for retail deposits with IMB facilities. Stable retail deposits with IMB will have a 10 per cent run-off factor, while less stable ones will have a 15 per cent factor.

Additionally, unsecured wholesale funding from non-financial small businesses will be treated like retail deposits under these guidelines. The draft also specifies that deposits currently excluded from Liquidity Coverage Ratio (LCR) computation, such as non-callable fixed deposits used as collateral, will now be considered callable for LCR purposes. Moreover, 'level 1' high-quality liquid assets in the form of government securities are to be valued at their current market value, adjusted for applicable haircuts. These guidelines will apply to all commercial banks, except payment banks, regional rural banks, and local area banks, starting April 1, 2025. Public comments are invited until August 31.