New Delhi, Aug 3 (IANS) The Reserve Bank of India’s move to let banks consider Liquidity Coverage Ratio (LCR) run off rates while pricing bulk deposits increases their flexibility to align deposit rates with liquidity costs, a report said on Monday.
The move also optimises banks' funding costs, and improves asset-liability management, the report from CareEdge Ratings said.
The report noted that the move could sharpen competition for deposits and widen funding cost disparities across lenders.
Banks with weaker deposit bases may face higher funding costs while those with strong Current Account and Savings Account franchises stand to benefit. The framework also tightens disclosure requirements to boost transparency, the report added.
The firm explained that the new approach allows banks to price bulk deposits differentially based on the liquidity characteristics and applicable run off rates, which requires lenders to hold adequate High-Quality Liquid Assets to meet potential cash outflows in stress periods.
They need to comply with the principle of non-discriminatory pricing for comparable deposit categories.
As different types of deposits and unsecured wholesale funding carry varying run-off rates, banks can now account for the associated liquidity costs when determining deposit pricing, it explained.
Previously, the pricing framework provided limited scope for differentiating rates based on the liquidity characteristics of deposits.
The RBI has issued revised instructions and amendment directions on deposit interest rates, effective from October 01, 2026, mandating uniform rates across all branches while granting pricing flexibility for bulk deposits based on liquidity risk.
Actual interest payout must strictly match the advanced schedule disclosed publicly on respective bank websites.
Banks must also publish their scheduled interest rates for bulk deposits on their websites by 10:00 am each business day and are allowed a grace period of 10 minutes.
