RBI Defers Rollout Of LCR Norms By A Year

Mumbai: In a big relief for banks, RBI Governor Sanjay Malhotra announced on Friday that the implementation of the proposed Liquidity Coverage Ratio (LCR), as well as project financing norms, will be deferred by a year and will not be implemented before March 31, 2026.

He said that the step has been taken as the earlier deadline of March 2025 does not give sufficient time for the implementation of these guidelines. The RBI does not want to cause a disruption in the financial system and will ensure a smooth transition, he added.

Both public sector and private sector banks had opposed the implementation of these norms, announced by then RBI Governor Shaktikanta Das, as they feared they would cause a liquidity crisis in the financial system. The heads of banks had raised the issue with Malhotra, shortly after he took over as RBI Governor with Das’s tenure coming to an end.

These norms were earlier scheduled to come into effect on April 1, 2025. According to treasury officials of banks, implementing the LCR norms would, in effect, mean over Rs4 lakh crore would have to be diverted from banks to buy government bonds instead of extending credit to corporates and individuals to boost demand in the economy and spur growth.

The Reserve Bank of India had got in touch with banks in the last week of January to understand the impact of its new liquidity coverage norms following concerns that the move would adversely impact the flow of credit in the economy.

Banks had asked for deferment of the norms and alternative mechanisms to cope with the likely hit that their operations would take.