The Reserve Bank of India has increased the threshold limit for Banks to maintain the Liquidity Coverage Ratio (LCR) on deposits and other ‘extension of funds’ received from non-financial small business customers from Rs 5 crore to Rs 7.5 crore. This is applicable on all Commercial Banks other than Regional Rural Banks, Local Area Banks, and Payments Banks. To better align RBI’s guidelines with the Basel Committee on Banking Supervision (BCBS) standard and enable banks to manage liquidity risk more effectively.
Liquidity Coverage Ratio:
LCR promotes the short-term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient high-quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days.