Daijiworld Media Network - New Delhi

New Delhi, Aug 3: The Reserve Bank of India's decision to allow banks to factor in Liquidity Coverage Ratio (LCR) run-off rates while pricing bulk deposits will enhance their flexibility in aligning deposit rates with liquidity costs, improve asset-liability management and optimise funding costs, according to a CareEdge Ratings report released on Monday.

The report said the revised framework could intensify competition for deposits and widen funding cost differences among lenders. Banks with weaker deposit franchises may face higher funding costs, while those with strong Current Account and Savings Account (CASA) bases are likely to benefit.

It added that the new norms would also strengthen disclosure requirements and improve transparency.

Under the revised framework, banks can price bulk deposits based on their liquidity characteristics and the applicable LCR run-off rates, enabling them to better account for liquidity costs while maintaining the principle of non-discriminatory pricing for comparable deposit categories.

As different categories of deposits and unsecured wholesale funding attract varying run-off rates, lenders can now incorporate these liquidity risks into deposit pricing. Earlier, banks had limited flexibility to differentiate interest rates based on the liquidity profile of deposits.

The RBI has issued revised instructions and amendment directions on deposit interest rates, which will come into effect from October 1, 2026. The norms require banks to maintain uniform interest rates across all branches while permitting differential pricing of bulk deposits based on liquidity risk.

Banks have also been directed to ensure that actual interest payments strictly match the rates published in advance on their websites. In addition, they must publish scheduled interest rates for bulk deposits by 10 a.m. on every business day, with a grace period of 10 minutes.