Stricter Liquidity Regulations for Indian Banks

The Reserve Bank of India (RBI) is introducing new liquidity rules for banks in response to the rise of digital banking. Banks will be required to set aside more funds for deposits accessed via online and mobile platforms, with stipulations including an additional 5% for standard deposits and up to 15% for less stable deposits. Additionally, the RBI is treating unsecured wholesale funding from small businesses similarly to retail deposits, increasing the liquidity requirements for banks. While these measures aim to enhance the stability of the banking sector, they may adversely affect bank profits due to the need for more high-quality liquid assets, potentially slowing down deposit and credit growth.