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New Delhi : With Reserve Bank's new liquidity standards expected to take effect April 2025, banks have pitched for the inclusion of mutual fund investments and tradable bonds as high-quality liquid assets (HQLA) in the calculation for the liquidity coverage ratio , people familiar with the deliberations said. ET Year-end Special Reads 2024 Rewind: Elections, extreme weather, sporting glories, moments that made history, and heartfelt goodbyes Sensex & Nifty in 2025: Predictions, targets, must-have stocks for the new year From Adani bribery allegations to PayTM Bank ban: Six shocks that rocked India Inc in 2024 Lenders have argued that such investments are highly liquid, comparable to lower-quality assets and that their inclusion in liquidity calculations could reduce the share of deposits banks must allocate for liquidity ratios, thereby freeing up capital for lending, they said. Banks have flagged this in a representation to the finance ministry, emphasising that additional liquid coverage ratio (LCR) requirements should be justified with data-driven rationale, an official said.
Best MF to invest Looking for the best mutual funds to invest? Here are our recommendations. View Details » The liquidity coverage ratio is the proportion of high-quality liquid assets (HQLA) that financial institutions hold to allow them to survive a period of significant liquidity stress lasting 30 calendar days. Under existing regulations, investment in mutual funds is not considered as part of HQLA for calculating LCR.
The other components of HQLA include cash, central bank deposits, and high-quality government securities. Artificial Intelligence(AI) Java Programming with ChatGPT: Learn using Generative AI By - Metla Sudha Sekhar, IT Specialist and Developer View Program Artificial Intelligence(AI) Basics of Generative AI: Unveiling Tomorrows Innovations By - Metla Sudha Sekhar, IT Specialist and Developer View Program Artificial Intelligence(AI) Generative AI for Dynamic Java Web Applications with ChatGPT By - Metla Sudha Sekhar, IT Specialist and Developer View Program Artificial Intelligence(AI) Mastering C++ Fundamentals with Generative AI: A Hands-On By - Metla Sudha Sekhar, IT Specialist and Developer View Program Artificial Intelligence(AI) Master in Python Language Quickly Using the ChatGPT Open AI By - Metla Sudha Sekhar, IT Specialist and Developer View Program Marketing Performance Marketing for eCommerce Brands By - Zafer Mukeri, Founder- Inara Marketers View Program Office Productivity Zero to Hero in Microsoft Excel: Complete Excel guide 2024 By - Metla Sudha Sekhar, IT Specialist and Developer View Program Finance A2Z Of Money By - elearnmarkets, Financial Education by StockEdge View Program Marketing Modern Marketing Masterclass by Seth Godin By - Seth Godin, Former dot com Business Executive and Best Selling Author View Program Astrology Vastu Shastra Course By - Sachenkumar Rai, Vastu Shashtri View Program Strategy Succession Planning Masterclass By - Nigel Penny, Global Strategy Advisor: NSP Strategy Facilitation Ltd. View Program Data Science SQL for Data Science along with Data Analytics and Data Visualization By - Metla Sudha Sekhar, IT Specialist and Developer View Program Artificial Intelligence(AI) AI and Analytics based Business Strategy By - Tanusree De, Managing Director- Accenture Technology Lead, Trustworthy AI Center of Excellence: ATCI View Program Web Development A Comprehensive ASP.
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In July, the RBI had come out with a draft circular on the Basel III framework regarding liquidity standards. Besides an additional 5% run-off factor on the internet and mobile banking (IMB)-enabled retail deposits and certain small business deposits, it has also proposed restricting the value of government securities (G-secs) forming a part of level 1 high HQLAs to the market value. According to the rating agency ICRA , due to the proposed changes, credit growth may moderate as lenders deploy a higher share of deposits to the HQLA.
"To recoup the LCR loss, banks may focus more on retail deposits, reducing the share of wholesale deposits," it said in a research note, adding that the proposed changes to LCR guidelines will reduce the system-wide reported LCR by 14-17% from 130% reported during Q4'2023-24 to 113-116% on account of higher run-off factors for certain deposits and haircuts on the HQLA..
