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Informist, Tuesday, Jan. 21, 2025

 

--Mkt sources: RBI sought bks' LCR details as per draft norm via DAKSH portal

--CONTEXT: DAKSH is RBI's Advanced Supervisory Monitoring System 

--Mkt sources:RBI seeking bks' LCR details, under draft norms, as of Dec 31

 

By Pratigya Vajpayee, Aaryan Khanna, and Pratiksha

 

MUMBAI/NEW DELHI - Less than three months before the draft guidelines on banks' Liquidity Coverage Ratio are proposed to come into effect, the Reserve Bank of India has asked some banks to submit details of their status, as on Dec. 31, under these new norms, according to four market sources aware of the development.

 

The query has been made through the RBI's DAKSH portal, which is its advanced system to monitor compliance requirements of supervised entities such as banks and non-banking finance companies. Banks have to submit the required details before the end of January, sources told Informist.

 

"They have asked for security-wise details of High Quality Liquid Assets as of Dec. 31, to be submitted by Jan. 29," one of the sources said. "The phrasing suggests that the Liquidity Coverage Ratio has to be computed both under the old norms and the new draft norms, with the enhanced run-offs."

 

The RBI released its draft Liquidity Coverage Ratio guidelines on Jul. 25, proposing that banks assign an additional 5% run-off factor to internet and mobile banking-enabled retail deposits. It also proposed tighter norms for valuing banks' High Quality Liquid Assets, among other changes. Currently, banks must maintain High Quality Liquid Assets worth 100% of their expected outflows for the next 30 days. The draft norms, which have faced opposition from the industry, are supposed to come into effect from Apr. 1.

 

The changes in the guidelines proposed by the central bank are expected to raise the quantum of outflows against which banks must maintain liquidity buffers. This, in turn, will increase the requirement to hold these so-called High Quality Liquid Assets, which primarily comprise government securities. According to sources, the RBI seems to be taking stock of the distance that banks would have to cover in order to meet the tighter regulatory norms.

 

"Given that the range of estimates for system-wide additional Liquidity Coverage Ratio is so wide and there have been widespread representations to defer or stagger the implementation of the new norms, RBI seems to be examining the size of the problem," a treasury official with a foreign bank said. Market experts estimate banks may need additional liquid assets worth INR 1 trillion-INR 4 trillion to comply with the proposed draft Liquidity Coverage Ratio guidelines.

 

The RBI asking banks details about their Liquidity Coverage Ratio numbers comes amid continued opposition by banks as well as the finance ministry. Informist had reported in October, quoting a senior finance ministry official, that the Department of Financial Services had written to the central bank and pitched for a staggered implementation of the draft norms on concerns that a full rollout on Apr. 1 would hurt lending activity. 

 

More recently, on Jan. 10, Informist reported that a change of command at the RBI--former revenue secretary Sanjay Malhotra took charge as the governor of the central bank in December--and pushback from the government could delay the implementation of the draft guidelines.

 

The RBI is yet to release the final guidelines. In December, Deputy Governor M. Rajeshwar Rao said the central bank had received "significant feedback" on its proposals, and they had to be "carefully evaluated".  End

 

Edited by Vandana Hingorani

 

 

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