The Nifty Bank index rose 1% to 55,854.80, after hitting a record high of 55,929.80 early today.
Canara Bank (up 3.13%), Bank of Baroda (up 2.83%), Kotak Mahindra Bank (up 2.30%), HDFC Bank (up 2.03%), State Bank of India (up 1.93%), Punjab National Bank (up 1.52%), Federal Bank (up 1.12%), IDFC First Bank (up 0.81%) and ICICI Bank (up 0.41%) surged.
In a welcome breather for banks, RBI has toned down its earlier proposal on liquidity norms, announcing that retail deposits accessed via internet and mobile banking will attract an additional run-off factor of only 2.5%, instead of the steeper 5% initially suggested in last year’s draft guidelines.
The final guidelines, now set to kick in from 1 April 2026, update the run-off factors for retail deposits. Stable deposits will now carry a 7.5% run-off rate, while less stable ones will be pegged at 12.5%, up from the current 5% and 10%, respectively. The run-off factor represents the share of deposits that might flee during short-term financial stress—a crucial element in how banks manage their liquidity buffers.
Additionally, the valuation of government securities classified as High-Quality Liquid Assets (HQLA) will be adjusted with haircuts that align with margin requirements under the Liquidity Adjustment Facility (LAF) and the Marginal Standing Facility (MSF).
Banks under the LCR (Liquidity Coverage Ratio) framework are required to maintain a healthy stockpile of HQLA to cover expected net cash outflows over a 30-day stress period. The RBI estimates that the net impact of the revised measures will boost banks’ LCR by around 6% as of December-end data—giving banks more cushion while still meeting global standards.
The new rules also bring relief on the wholesale funding front. Funding from non-financial legal entities such as trusts, partnerships, and LLPs will now attract a reduced run-off rate of 40%, a significant drop from the current 100%. This adjustment is expected to better reflect the relatively stable nature of such funding.
Overall, the RBI has signaled that the sector remains comfortably compliant with regulatory liquidity norms—and that these calibrated tweaks aim to strengthen the system's resilience without ruffling feathers.