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Informist, Friday, Feb. 7, 2025

 

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--RBI Malhotra: Don't think Mar 31 is sufficient time for draft LCR norms 
--RBI Malhotra: LCR norms not to be implemented before Mar 31 
--RBI Malhotra: Revising estimates, impact analysis on draft LCR norms 
--RBI Malhotra: Will give banks more time to adopt LCR norms 
--RBI Malhotra:Will aspire to give banks time till Mar 31, 2026 for LCR norms 
--RBI Malhotra: There is no time frame for expected credit loss norms 
--RBI Malhotra: No timeframe for expected credit loss norms 
--RBI Malhotra: Measures on bks are taken after great consideration, thought 
--RBI Malhotra: We would not like to use measures on bks often 
--RBI Malhotra: Plan to roll out revised LCR norms in a phased manner 
--RBI Malhotra: Earliest roll out date for project finance norms March 2026

 

MUMBAI – It would not be possible to implement the draft norms on the liquidity standards by Mar. 31, Reserve Bank of India's Governor Sanjay Malhotra said in the post Monetary Policy press conference on Friday. He said that they have received feedback and are revising their estimates and analysing the impact on these norms. He said that the other draft norms relating to project finance will also be implemented by March 2026.

 

"To make it very clear, it is more than one year. Two months, or less than two months, is too short a window for the banks, we realise that. We want to make it very smooth, and it will also be phased. Which means that all the regulations will not kick in from Day 1, which will be at the earliest Mar. 31, 2026," Malhotra said. As per the draft guidelines on liquidity standards, the instructions were supposed to come into effect from Apr. 1.

 

As per the draft guidelines on Basel-III framework on Liquidity Standards, banks will have to assign an additional 5% run-off factor for retail deposits which are enabled with internet and mobile banking facilities. It also stated that the level 1 high quality liquid assets in the form of government securities should be valued at an amount not greater than their current market value, adjusted for applicable haircuts in line with the margin requirements under the liquidity adjustment facility and marginal standing facility.  

 

The draft project finance norms, which were issued on May 3, proposed tighter guidelines on project financing under which lenders would have to make provisions of up to 5% on the outstanding exposures during construction, as against 0.4% currently, which would be reduced to 2.5% once the asset turns operational. As per the proposed norms, lenders are required to make the 5% provision in a phased manner—-2% in 2024-25 (Apr-Mar), 3.5% in FY26 and 5% in FY27.

 

On the implementation of the expected credit loss guidelines, Malhotra said that there is no timeframe for it, as only a discussion paper has been released and the draft is yet to be formulated. In October 2023, the RBI formed a working group to frame the expected credit loss-based framework for provisioning by banks. The discussion paper expects a forward-looking, principle-based framework for provisioning for credit risk, which has already been implemented under International Accounting Standards Board and US Financial Accounting Standards Board, the release said.

 

While announcing the outcome of the Monetary Policy Committee, Malhotra said, "We recognise that just like there are no free lunches, regulation to enhance stability and consumer protection, too, is not devoid of costs. There are trade-offs between stability and efficiency. We will keep this trade-off in mind while formulating regulations. It will be our attempt to strike the right balance, keeping in view the benefits and costs of each and every regulation." He also said that RBI will continue the consultative process in regulation making.  End

 

Reported by Kshipra Petkar

Edited by Akul Nishant Akhoury

 

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