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Banks' Liquidity Boost: Wholesale Deposits Rewarded
5 Mar
Summary
- New RBI norms will lower run-off factors for wholesale deposits from April 2026.
- Private banks are expected to benefit more due to higher wholesale deposit shares.
- RBI estimates the changes will improve banks' aggregate LCR by six percentage points.
Effective April 1, 2026, banks with substantial wholesale deposits, primarily private sector lenders, are poised for improved liquidity coverage ratios (LCR). This adjustment stems from revised Reserve Bank of India (RBI) norms that will apply lower run-off factors to wholesale deposits from trusts, partnerships, and limited liability partnerships (LLPs).
Under the new framework, these specific wholesale deposit types will face a reduced run-off rate of 40%, a significant decrease from the current 100%. Experts note that banks with a greater concentration of these deposits will experience a more pronounced benefit.
Consequently, public sector banks, which tend to rely more heavily on retail deposits, may see a relatively smaller advantage from these regulatory changes compared to their private sector counterparts. The RBI anticipates that, in aggregate, these measures will enhance the LCR of banks by around six percentage points.
