A bank can have plenty of capital and still fail in a week if it runs out of cash. Capital rules (Part 27) ask whether a bank can absorb losses. Liquidity rules ask a different question: can it pay depositors and lenders who want their money back now? After the 2008 crisis, when banks with adequate capital collapsed because funding vanished overnight, the Basel Committee added two liquidity standards to Basel III. The Liquidity Coverage Ratio (LCR) makes a bank hold enough high-quality liquid assets (HQLA) to survive 30 days of stress. The Net Stable Funding Ratio (NSFR) makes it fund long-term assets with long-term, stable money. Both must be at least 100% in India. This part explains how each ratio is built, what counts and what does not, how the RBI tightened the LCR from 1 April 2026 for deposits that can leave at the tap of a phone, and why the collapse of Silicon Valley Bank in 2023 shaped those rules.
This part builds on CRR and SLR (Part 5), which covers the SLR carve-out and FALLCR, and on the RBI's regulation of banks and NBFCs (Part 18), which places the LCR and NSFR within Basel III. How the RBI supplies liquidity to banks day to day is in LAF and MSF (Part 11).
In the news
- 16 October 2026: daily CRR rises to 99%. From the fortnight beginning 16 October, banks must keep at least 99% of their required CRR balance every day, up from 90% (RBI notification of 9 October 2026). Why it matters for the exam: only cash held above the required CRR counts as Level 1 HQLA, so a tighter daily CRR leaves less spare cash in the LCR.
- 1 October 2026: bulk deposit rates can follow LCR run-off rates. Amendment directions issued on 30 July 2026 let commercial banks offer different interest rates on bulk deposits according to the run-off rate each deposit attracts under the LCR. Why it matters for the exam: for the first time, the LCR directly shapes deposit pricing: money that is less likely to run can be paid more.
- 30 June 2026: LCR at 124.2%, NSFR at 122.1%. The Financial Stability Report (June 2026) said the aggregate LCR and NSFR of scheduled commercial banks eased to 124.2% and 122.1% in March 2026, with every bank group well above the minimum. Why it matters for the exam: these are the latest system-wide figures to quote.
- 30 June 2026: three banks would breach the LCR under severe stress. In the same report's liquidity stress test, the aggregate LCR of select banks fell from 123.7% to 116.7% in the first scenario and 110.8% in the second, where three banks fell below 100%. Public sector banks saw the biggest drop, 13.9 percentage points. Why it matters for the exam: stress tests use the LCR's own weights and then make run-offs harsher.
- 1 April 2026: revised LCR rules take effect. Retail and small business deposits that can be moved through internet banking, mobile banking or UPI now carry an extra 2.5 percentage point run-off. Government securities in HQLA are valued after haircuts, and funding from trusts, partnerships and LLPs falls from a 100% to a 40% run-off. Why it matters for the exam: the most-asked change in liquidity regulation this year.
- 28 November 2025: liquidity rules consolidated. The LCR and NSFR rules were folded into the Reserve Bank of India (Commercial Banks – Asset Liability Management) Directions, 2025, one of the 244 consolidated Master Directions. Why it matters for the exam: the old 2014 LCR and 2018 NSFR circulars now live in one document.
Why liquidity needs its own rules
Solvency is not liquidity
A bank is solvent if its assets are worth more than its liabilities. It is liquid if it can pay what falls due today. The two can part company. A bank's loans may be sound, but a 20-year home loan cannot be turned into cash this afternoon. Deposits, on the other hand, can be withdrawn on demand. This maturity transformation (borrowing short and lending long) is what banks are for, as Part 23 explains, but it means that every bank is exposed to a run.
Before 2008, global rules focused on capital. Banks such as Northern Rock in the UK (2007) and Lehman Brothers (2008) failed when wholesale lenders refused to roll over short-term funding. Their capital ratios did not save them. The Basel Committee responded with two ratios:
- the LCR, published in January 2013, for a 30-day acute stress; and
- the NSFR, finalised in October 2014, for structural funding over one year.
The two ratios at a glance
| LCR | NSFR | |
|---|---|---|
| Question asked | Can the bank survive 30 days of stress? | Is the bank's funding structure stable over a year? |
| Formula | HQLA ÷ net cash outflows over 30 days | Available stable funding ÷ required stable funding |
| Horizon | 30 calendar days | One year |
| Minimum in India | 100% (from 1 January 2019, after a phase-in) | 100% (from 1 October 2021) |
| Indian rule today | ALM Directions, 2025 (originally the circular of 9 June 2014) | ALM Directions, 2025 (originally the circular of 17 May 2018) |
| SCB average, March 2026 | 124.2% | 122.1% |
The Liquidity Coverage Ratio
The formula
LCR = stock of HQLA ÷ total net cash outflows over the next 30 calendar days ≥ 100%
The numerator is what the bank can turn into cash quickly without a big loss. The denominator is how much cash it would lose in a 30-day stress. The RBI's directions describe that stress as a mix of events: part of retail deposits running off, partial loss of unsecured wholesale funding and of secured short-term funding, extra outflows from a credit-rating downgrade of up to three notches, higher collateral haircuts, unscheduled draws on committed credit lines, and the bank's own need to buy back debt to protect its reputation.
Net outflows are worked out as:
net outflows = outflows − min (inflows, 75% of outflows)
The 75% cap on inflows means a bank can never rely entirely on money it expects to receive. At least 25% of gross outflows must always be covered by HQLA.
High-quality liquid assets
HQLA must be unencumbered (not already pledged), easy to value, low in risk and saleable or repo-able in a deep market even in stress. They fall into three levels.
Level 1 (no cap). In India this means:
- cash, including CRR balances in excess of the required CRR;
- overnight balances with the RBI under the Standing Deposit Facility;
- government securities in excess of the minimum SLR;
- government securities within the mandatory SLR up to the MSF limit (2% of NDTL) and the FALLCR limit (16% of NDTL); and
- marketable securities of foreign sovereigns with a 0% risk weight.
Until March 2026 Level 1 assets carried no haircut. From 1 April 2026, government securities in Level 1 are taken at market value less a haircut equal to the margin the RBI charges on that security in its LAF and MSF windows. Under the RBI's schedule (in force since August 2018), those margins rise with residual maturity: from 0.5% on Treasury bills and central government bonds with up to a year left, to 4% on central bonds of over 15 years, and from 1.5–2.5% to 5–6% on state development loans. The logic: if the RBI itself would lend only 98 rupees against a bond worth 100, the bond should count as 98 rupees of liquidity.
Level 2A (15% haircut). Securities of sovereigns, public sector entities and multilateral development banks with a 20% risk weight; corporate bonds rated AA- or better; commercial paper with an equivalent short-term rating. Paper issued by banks, financial institutions and NBFCs does not qualify, because in a crisis it would fall in value with the bank's own.
Level 2B (50% haircut). Sovereign securities with a risk weight above 20% up to 50% (rated at least BBB-); corporate debt and commercial paper rated A+ to BBB-; and common equity shares in the Nifty 50 or Sensex, again excluding banks, FIs and NBFCs.
Caps. Level 2 assets (2A plus 2B, after haircuts) may make up at most 40% of total HQLA, and Level 2B at most 15%. Put differently, Level 2 can be at most two-thirds of Level 1.
FALLCR and the SLR overlap
Indian banks already hold 18% of NDTL in SLR securities. If those bonds could never be used because the SLR must be met every day, they would not really be liquid. So the RBI lets banks count them: 2% of NDTL through the MSF window plus 16% through the Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR), a total of 18%, equal to the whole SLR. FALLCR is for stress only. A bank may borrow from the RBI against these securities only after it has used its other HQLA, including the MSF securities, and it must declare that it is doing so. The background, including the rise from 15% to 16% in 2022, is in Part 5.
This is why government securities dominate Indian HQLA. Indian Overseas Bank's disclosure for the quarter ended March 2026, for example, says its HQLA were "primarily driven by" government securities above the SLR and within the MSF and FALLCR limits, with Level 2 made up mainly of AA- and above corporate bonds and commercial paper.
Run-off rates: the heart of the denominator
The bank does not assume that every deposit leaves. It applies a run-off rate to each kind of funding, based on how likely it is to flee in stress.
| Funding source | Run-off rate (from 1 April 2026) |
|---|---|
| Stable retail deposits (insured, in a transactional or relationship account) | 5%; 7.5% if internet or mobile banking enabled |
| Less stable retail deposits | 10%; 12.5% if internet or mobile banking enabled |
| Small business customers (up to ₹7.5 crore of funding) | Treated as retail, same rates |
| Operational deposits (clearing, custody, cash management) | 25%; 5% on the insured part |
| Non-financial corporates, sovereigns, PSEs | 40% |
| Trusts, partnerships, LLPs, proprietorships and other non-financial entities | 40% (was 100%) |
| Banks, insurers, financial institutions ("other legal entities") | 100% |
A stable deposit is one insured by the DICGC (see Part 30) and held in an account where the customer has a real relationship with the bank: salary or pension credited automatically, bills paid by standing mandate, or several products with the same bank. Such money is sticky. Uninsured, rate-chasing money is not.
Why is wholesale money treated so harshly? A corporate treasurer moving ₹500 crore watches news about the bank closely and can move the whole sum in minutes. A bank or mutual fund lender will simply not roll over. That is why 40% and 100% run-offs apply.
Retail deposits and term deposits
The LCR counts retail demand and term deposits whatever their maturity, because a depositor can usually break a fixed deposit early. A deposit that normally falls outside the calculation, such as a non-callable fixed deposit, is from April 2026 treated as callable if it has been pledged as collateral for a loan, since the bank may have to release it.
The 2024–2026 rewrite: digital runs
Why the RBI moved
In March 2023 Silicon Valley Bank lost over $40 billion of deposits in a single day (see below). The lesson was clear: with mobile banking and social media, depositors can run faster than the 30-day LCR imagined. India has one of the world's most digital banking systems, with UPI available on almost every account, so the RBI reviewed its run-off rates.
Draft and final compared
| Draft (25 July 2024) | Final (21 April 2025) | |
|---|---|---|
| Extra run-off on IMB-enabled retail and SBC deposits | 5 points | 2.5 points |
| Stable retail, IMB-enabled | 10% | 7.5% |
| Less stable retail, IMB-enabled | 15% | 12.5% |
| Haircuts on Level 1 government securities | In line with LAF/MSF margins | Same |
| Pledged deposits | Treated as callable | Same |
| Trusts, partnerships, LLPs | Not in the draft | Moved to "non-financial corporates": 40%, down from 100% |
| Effective date | 1 April 2025 | 1 April 2026 |
"IMB" covers internet banking, mobile banking and UPI, so in practice almost every retail account qualifies. The final circular (RBI/2025-26/27, 21 April 2025) applies to all commercial banks except payments banks, regional rural banks and local area banks.
The RBI estimated that the package as a whole would raise the aggregate LCR of banks by about 6 percentage points, on data as of 31 December 2024. The extra digital run-off and the bond haircuts push the ratio down, but the lower run-off for trusts, partnerships and LLPs more than offsets them. That surprises many students: a rule widely reported as "tightening" left the system with a higher ratio. Individual banks differ. A bank funded mostly by retail savers with mobile apps loses; one with large deposits from trusts and partnerships gains.
The RBI also put the start back a year, to 1 April 2026, to give banks time to change their systems.
Pricing deposits by run-off
The next step came on 30 July 2026. Amendments to the interest rate on deposits directions, effective 1 October 2026, give banks the freedom to offer different rates on bulk deposits (single rupee term deposits of ₹3 crore and above for commercial banks) according to the run-off rate under the LCR. A bulk deposit from a trust that attracts a 40% run-off costs the bank less HQLA than one from a mutual fund at 100%, so it can be paid more. The general rule that deposit rates must be uniform for deposits of the same size and date still applies.
Worked example: LCR before and after April 2026
Bank A has NDTL of ₹1,00,000 crore. All figures are in ₹ crore.
Step 1: HQLA.
| Asset | Value | Old weight | Old HQLA | New weight | New HQLA |
|---|---|---|---|---|---|
| Cash above required CRR | 500 | 100% | 500 | 100% | 500 |
| Government securities (18,000 SLR + 2,000 excess) | 20,000 | 100% | 20,000 | 98% (2% average haircut) | 19,600 |
| AA-rated corporate bonds (Level 2A) | 1,500 | 85% | 1,275 | 85% | 1,275 |
| Nifty 50 shares (Level 2B) | 400 | 50% | 200 | 50% | 200 |
| Total | 21,975 | 21,575 |
Level 2 is 1,475 ÷ 21,575 = 6.8% of HQLA, well under the 40% cap, and Level 2B is under 1%.
Step 2: outflows. Assume every retail account has mobile banking.
| Funding | Amount | Old rate | Old outflow | New rate | New outflow |
|---|---|---|---|---|---|
| Stable retail deposits | 40,000 | 5% | 2,000 | 7.5% | 3,000 |
| Less stable retail deposits | 30,000 | 10% | 3,000 | 12.5% | 3,750 |
| Non-financial corporates | 15,000 | 40% | 6,000 | 40% | 6,000 |
| Trusts and partnerships | 5,000 | 100% | 5,000 | 40% | 2,000 |
| Banks and other FIs | 5,000 | 100% | 5,000 | 100% | 5,000 |
| Total | 21,000 | 19,750 |
Step 3: inflows and the cap. Contractual inflows, after the RBI's weights, are 4,000. The cap is 75% of outflows (15,750 under the new rules), so it does not bind. Net outflows are 21,000 − 4,000 = 17,000 (old) and 19,750 − 4,000 = 15,750 (new).
Step 4: the ratio.
- Old LCR = 21,975 ÷ 17,000 = 129.3%
- New LCR = 21,575 ÷ 15,750 = 137.0%
The digital add-on cost Bank A ₹1,750 crore of extra outflows and the haircut ₹400 crore of HQLA, but the trust and partnership change saved ₹3,000 crore. Remove the trusts from the example and the new LCR would be 21,575 ÷ 18,750 (outflows of 22,750 less inflows of 4,000) = 115.1%. A purely retail bank would have fallen.
When the inflow cap bites. A treasury-heavy bank expects outflows of ₹10,000 crore and inflows of ₹9,000 crore. Without a cap, net outflows would be ₹1,000 crore. With the cap, inflows count only up to ₹7,500 crore, so net outflows are ₹2,500 crore. With HQLA of ₹2,000 crore, its LCR is 80%, not 200%.
A real bank. Indian Overseas Bank reported average HQLA (after haircuts) of ₹94,248.85 crore and net cash outflows of ₹77,248.10 crore for January–March 2026: 94,248.85 ÷ 77,248.10 = 122.01%.
The Net Stable Funding Ratio
The idea
The LCR covers a sharp 30-day shock. The NSFR looks at the shape of the whole balance sheet. A bank that funds 10-year loans with overnight borrowing may pass the LCR today and still be fragile. The NSFR asks it to fund long-term, illiquid assets with funding that will stay for at least a year.
NSFR = available stable funding (ASF) ÷ required stable funding (RSF) ≥ 100%
Each liability gets an ASF factor (how stable it is) and each asset an RSF factor (how much stable funding it needs). India issued final NSFR guidelines on 17 May 2018. After deferrals during the pandemic (to 1 April 2021 in September 2020, then by six more months in February 2021), the NSFR took effect on 1 October 2021. Banks report it quarterly.
ASF factors (liabilities)
| ASF factor | Liabilities |
|---|---|
| 100% | Regulatory capital; other liabilities with residual maturity of one year or more |
| 95% | Stable retail and small business deposits under a year |
| 90% | Less stable retail and small business deposits under a year |
| 50% | Funding under a year from non-financial corporates, sovereigns and PSEs; operational deposits; other funding of six months to a year, including from the RBI |
| 0% | Everything else, including funding from financial institutions and the RBI under six months |
RSF factors (assets)
| RSF factor | Assets |
|---|---|
| 0% | Cash, CRR balances, claims on the RBI under six months |
| 5% | Unencumbered Level 1 assets, including SLR securities |
| 15% | Unencumbered Level 2A assets |
| 50% | Unencumbered Level 2B assets; loans and other non-HQLA assets maturing within a year |
| 65% | Loans of a year or more with a risk weight of 35% or less, such as qualifying home loans |
| 85% | Other performing loans of a year or more; non-HQLA securities; exchange-traded equities; gold |
| 100% | Non-performing loans, fixed assets, loans to FIs of a year or more, assets encumbered for a year or more |
Off-balance-sheet items also need some stable funding: 5% of undrawn credit and liquidity facilities and 3% of trade finance, guarantees and letters of credit.
Worked example: NSFR
Bank B has a balance sheet of ₹1,05,000 crore (₹ crore throughout).
Available stable funding
| Liability | Amount | ASF factor | ASF |
|---|---|---|---|
| Capital | 10,000 | 100% | 10,000 |
| Bonds with more than a year to maturity | 5,000 | 100% | 5,000 |
| Stable retail deposits | 30,000 | 95% | 28,500 |
| Less stable retail deposits | 25,000 | 90% | 22,500 |
| Corporate deposits under a year | 25,000 | 50% | 12,500 |
| Interbank borrowing under six months | 10,000 | 0% | 0 |
| Total | 1,05,000 | 78,500 |
Required stable funding
| Asset | Amount | RSF factor | RSF |
|---|---|---|---|
| Cash and CRR | 4,000 | 0% | 0 |
| Government securities | 20,000 | 5% | 1,000 |
| AA-rated corporate bonds | 2,000 | 15% | 300 |
| Loans maturing within a year | 15,000 | 50% | 7,500 |
| Home loans (35% risk weight or less) | 20,000 | 65% | 13,000 |
| Other loans over a year | 38,000 | 85% | 32,300 |
| NPAs | 1,000 | 100% | 1,000 |
| Fixed and other assets | 5,000 | 100% | 5,000 |
| Total | 1,05,000 | 60,100 |
NSFR = 78,500 ÷ 60,100 = 130.6%. If Bank B replaced ₹10,000 crore of stable retail deposits with interbank money under six months, ASF would fall by 9,500 to 69,000, and the NSFR would drop to 69,000 ÷ 60,100 = 114.8%. Same balance sheet size, weaker funding.
Notice how the two ratios interact. Government securities help the LCR a lot (they are HQLA) and cost little under the NSFR (5% RSF). Long-term corporate loans do nothing for the LCR and need 85% stable funding under the NSFR. Retail deposits are cheap in LCR terms (5–12.5% run-off) and count for 90–95% ASF. That is why both ratios push banks towards retail deposits and government bonds, and why a bank whose loans grow much faster than its deposits soon feels the strain on both.
How Indian banks measure up
Indian banks run comfortably above both minimums. The June 2026 FSR put the scheduled commercial bank averages at 124.2% (LCR) and 122.1% (NSFR) for March 2026. Banks publish LCR and NSFR disclosures on their websites, in a standard format showing HQLA, weighted outflows and inflows.
The pandemic tested the system. On 17 April 2020 the RBI let banks run the LCR down to 80%, to be restored to 90% by 1 October 2020 and 100% by 1 April 2021, so that they could use their buffers to lend. A buffer that can never be used is not really a buffer, and the LCR was designed to fall in a crisis.
Two features make the Indian LCR easier to meet than it looks:
- The SLR carve-out. Because the whole 18% SLR counts as Level 1 HQLA, an Indian bank starts with a large stock before holding a single extra bond.
- A retail deposit base. Most Indian deposits are retail and many are insured, which keeps run-off rates low.
Two features make it harder:
- Digital access now raises run-offs on nearly every retail account.
- Haircuts on government securities trim the numerator by roughly 0.5–6% depending on the bond.
The FSR's stress test is a reminder that 100% is a floor, not a comfort zone: under its severe scenario, three banks would have breached the minimum.
The SVB lesson
Silicon Valley Bank (SVB) was a large US bank serving technology start-ups and venture capital firms. Its story, set out in the Federal Reserve's review of April 2023, shows exactly what the LCR is meant to prevent.
- The setup. At end-2022 about 94% of SVB's deposits were uninsured, more than double the average for large US banks. It had parked deposits in long-dated bonds that lost value as US rates rose in 2022.
- 8 March 2023. SVB announced it had sold $21 billion of securities at a $1.8 billion after-tax loss and would try to raise $2.25 billion of capital.
- 9 March. Depositors, many linked through the same venture capital networks and "fuelled by social media" in the Fed's words, withdrew over $40 billion in one day.
- 10 March. SVB expected over $100 billion more to leave. California's regulator closed it that morning.
- 12 March. US authorities protected all depositors, insured and uninsured, and the Fed launched the Bank Term Funding Program, lending for up to a year against bonds valued at par.
Where the LCR fits. SVB crossed $100 billion in assets in 2021, but under the US "tailoring" rules of 2019 the LCR and NSFR had not yet been applied to it. The Fed estimated that under the earlier, stricter rules SVB would have been subject to the full LCR and would have been about 9% short of HQLA in December 2022 and about 17% short in February 2023. The bigger lesson was about speed: the standard LCR assumes a corporate deposit base loses 40% in 30 days; SVB was losing that kind of money in 48 hours. That is what drove India's extra run-off on digitally accessible deposits and the Basel Committee's own review of the 2023 turmoil.
The case also connects to capital. The Fed found that under the pre-2019 rules SVB would have had to count unrealised losses on its available-for-sale bonds, which would have cut its regulatory capital by $1.9 billion in December 2022. This is covered in Part 29, why banks fail, and interest rate risk in the banking book in Part 40.
Common exam traps
CRR balances are not all HQLA. Only cash in excess of the required CRR counts as Level 1. The required CRR itself does not.
The haircut on Level 1 is new. Before April 2026 Level 1 assets had a 0% haircut. Now government securities carry the RBI's LAF/MSF margins. Cash still has no haircut.
2.5, not 5. The July 2024 draft proposed an extra 5 points of run-off; the final rule is 2.5 points. Stable digital deposits are 7.5%, not 10%.
The new LCR rules started in 2026, not 2025. Issued 21 April 2025, effective 1 April 2026.
The inflow cap is 75% of outflows, not of HQLA. Net outflows can never be less than 25% of gross outflows.
Level 2 caps. 40% for all of Level 2 and 15% for Level 2B, measured after haircuts.
NSFR in India from October 2021. The Basel deadline was January 2018; India deferred several times.
LCR horizon 30 days, NSFR one year. Do not mix them up.
Key facts at a glance
| LCR | HQLA ÷ net cash outflows over 30 days ≥ 100% |
| NSFR | Available stable funding ÷ required stable funding ≥ 100% |
| Basel LCR / NSFR texts | January 2013 / October 2014 |
| LCR in India | Circular of 9 June 2014; 60% from 1 January 2015, 100% from 1 January 2019 |
| NSFR in India | Final guidelines 17 May 2018; effective 1 October 2021 |
| Covid relief | LCR could fall to 80% (17 April 2020); 100% again from 1 April 2021 |
| HQLA haircuts | Level 1: 0% (G-secs at LAF/MSF margins from April 2026); 2A: 15%; 2B: 50% |
| HQLA caps | Level 2 ≤ 40%; Level 2B ≤ 15% |
| SLR carve-out | MSF 2% + FALLCR 16% = 18% of NDTL |
| Inflow cap | 75% of total outflows |
| Retail run-off | Stable 5%, less stable 10%; +2.5 points if IMB-enabled (from 1 April 2026) |
| Wholesale run-off | Non-financial corporates (now including trusts, partnerships, LLPs) 40%; FIs 100% |
| LCR draft / final / effective | 25 July 2024 / 21 April 2025 / 1 April 2026 |
| RBI estimate of impact | Aggregate LCR up about 6 percentage points |
| Bulk deposit pricing by run-off | Issued 30 July 2026; from 1 October 2026 |
| Current rulebook | Commercial Banks – Asset Liability Management Directions, 2025 |
| SCB averages, March 2026 | LCR 124.2%, NSFR 122.1% |
Exam corner: what to remember
- LCR = HQLA ÷ 30-day net outflows ≥ 100%; NSFR = ASF ÷ RSF ≥ 100%.
- HQLA haircuts 0 / 15 / 50%; caps 40% (Level 2) and 15% (Level 2B).
- FALLCR 16% + MSF 2% = 18% of NDTL, the whole SLR, counts as Level 1.
- From 1 April 2026: +2.5 points run-off on internet, mobile and UPI-enabled retail and small business deposits (7.5% / 12.5%); G-secs valued after LAF/MSF haircuts; trusts, partnerships and LLPs at 40% instead of 100%.
- The draft (25 July 2024) proposed +5 points and a start date of 1 April 2025.
- The RBI expects the package to raise aggregate LCR by about 6 points.
- NSFR effective 1 October 2021 in India.
- SVB (10 March 2023): 94% uninsured deposits, over $40 billion withdrawn in a day; not yet subject to the full LCR.
- June 2026 FSR: LCR 124.2%, NSFR 122.1%; three banks would breach the LCR in the severe stress scenario.
For exam-specific syllabus and pattern details, see our pages for RBI Grade B, SBI PO and IBPS PO.
Test yourself
The Liquidity Coverage Ratio requires a bank to hold high-quality liquid assets sufficient to cover net cash outflows over:
Show answer
Answer: (c) The LCR covers a 30-day stress; the one-year horizon belongs to the NSFR.
Under the RBI's final LCR rules effective 1 April 2026, the run-off rate on stable retail deposits enabled with internet and mobile banking is:
Show answer
Answer: (b) The base 5% plus an extra 2.5 points; 10% was the July 2024 draft and 12.5% is for less stable deposits.
What haircut applies to Level 2B assets such as Nifty 50 shares in the LCR?
Show answer
Answer: (d) Level 2B assets carry a 50% haircut; Level 2A assets carry 15%.
In India, the Net Stable Funding Ratio came into effect on:
Show answer
Answer: (c) After pandemic deferrals the NSFR took effect on 1 October 2021; 1 January 2018 was the Basel deadline.
A bank has HQLA of ₹6,000 crore, expected outflows of ₹20,000 crore and expected inflows of ₹16,000 crore. Its LCR is:
Show answer
Answer: (b) Inflows are capped at 75% of ₹20,000 crore = ₹15,000 crore, so net outflows are ₹5,000 crore and LCR = 6,000 ÷ 5,000 = 120% (not 150%).
A bank has available stable funding of ₹90,000 crore and required stable funding of ₹75,000 crore. Its NSFR is:
Show answer
Answer: (d) NSFR = 90,000 ÷ 75,000 = 120%.
Under the June 2026 Financial Stability Report, the aggregate LCR of scheduled commercial banks in March 2026 was about:
Show answer
Answer: (a) The FSR put the LCR at 124.2% and the NSFR at 122.1%; 110.8% was the result under the severe stress scenario.
From 1 October 2026, commercial banks may offer differential interest rates on bulk deposits based on:
Show answer
Answer: (b) Amendment directions of 30 July 2026 link bulk deposit pricing to the deposit's run-off rate under the LCR framework.
Which of the following is NOT treated as Level 1 HQLA in India?
Show answer
Answer: (c) AA- or better corporate bonds are Level 2A, with a 15% haircut; the others are Level 1.
Under the RBI's final LCR rules, funding from trusts, partnerships and LLPs (not small business customers) now attracts a run-off rate of:
Show answer
Answer: (c) These entities moved from "other legal entities" at 100% to "non-financial corporates" at 40% from 1 April 2026.
Further reading
- Reserve Bank of India (Commercial Banks – Asset Liability Management) Directions, 2025: the current rulebook, with the full LCR and NSFR chapters, HQLA lists, run-off rates and ASF/RSF factors.
- RBI circular on the LCR review, 21 April 2025: the final 2026 changes in the RBI's own words, with footnotes on what counts as internet and mobile banking.
- RBI draft circular on the LCR, 25 July 2024: read it beside the final circular to see what the RBI changed after consultation.
- Basel Committee, Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools (January 2013): the global standard, with the reasoning behind each run-off rate.
- Basel Committee, Basel III: the net stable funding ratio (October 2014): the NSFR standard and its ASF and RSF tables.
- Federal Reserve, Review of the Federal Reserve's Supervision and Regulation of Silicon Valley Bank (April 2023): a frank account of how a bank with 94% uninsured deposits failed in two days.
- Basel Committee, Report on the 2023 banking turmoil (October 2023): the global lessons, including on liquidity rules and the speed of digital runs.
- RBI Financial Stability Report, June 2026: the latest LCR and NSFR figures and the liquidity stress test.
Sources
- RBI, Commercial Banks – Asset Liability Management Directions, 2025: LCR minimum of 100% and stress scenario; HQLA characteristics; Level 1 list including SDF balances, MSF 2% and FALLCR 16% and FALLCR conditions; Level 2A and 2B assets, 15% and 50% haircuts, 40% and 15% caps; G-sec haircuts from 1 April 2026; 75% inflow cap; stable deposit definition; ₹7.5 crore SBC limit; operational deposits 25%/5%; 2.5-point IMB add-on; trusts and partnerships at 40%; NSFR scope, 100% minimum, quarterly reporting, ASF and RSF factors (accessed 24 October 2026)
- RBI circular RBI/2025-26/27, 21 April 2025: final LCR amendments, applicability, IMB definition including UPI, 7.5% and 12.5% rates, SBC treatment, haircuts in line with LAF/MSF margins, pledged deposits, "other legal entities" redefined, 40% for non-financial entities, effective 1 April 2026 (accessed 24 October 2026)
- RBI press release 2025-2026/145, 21 April 2025: summary of the final changes; estimated 6 percentage point rise in aggregate LCR on 31 December 2024 data; deferral to 1 April 2026 (accessed 24 October 2026)
- RBI draft circular, 25 July 2024: proposed 5-point add-on, 10% and 15% rates, haircuts, pledged deposits, proposed date of 1 April 2025 (accessed 24 October 2026)
- Business Standard, 21 April 2025: news report of the final 2.5% run-off rule (accessed 24 October 2026)
- RBI circular, 9 June 2014: original LCR guidelines; 60% from 1 January 2015 rising to 100% on 1 January 2019 (accessed 24 October 2026)
- RBI circular RBI/2020-21/95, 5 February 2021: NSFR final guidelines of 17 May 2018; deferral of 29 September 2020; effective date of 1 October 2021 (accessed 24 October 2026)
- Business Standard, 17 April 2020: LCR requirement lowered to 80%, restored to 90% by 1 October 2020 and 100% by 1 April 2021 (accessed 24 October 2026)
- RBI notification on LAF and MSF margins, June 2018: margin schedule by residual maturity for central government securities and SDLs, effective 1 August 2018 (accessed 24 October 2026)
- RBI Financial Stability Report, June 2026, Chapter II: aggregate LCR of 124.2% and NSFR of 122.1%; liquidity stress test results of 123.7%, 116.7% and 110.8%; three banks below the minimum; 13.9-point fall for PSBs (accessed 24 October 2026)
- RBI Financial Stability Reports page: release date of the June 2026 FSR, 30 June 2026 (accessed 24 October 2026)
- TaxGuru, RBI amends commercial bank deposit interest rate rules: Second Amendment Directions of 30 July 2026 (RBI/2026-27/214), differential bulk deposit rates by LCR run-off, effective 1 October 2026 (accessed 24 October 2026)
- Business Today, 30 July 2026: uniformity rule retained alongside bulk deposit flexibility (accessed 24 October 2026)
- Indian Overseas Bank, LCR disclosure for FY 2025-26: HQLA of ₹94,248.85 crore, net outflows of ₹77,248.10 crore and LCR of 122.01% for the March 2026 quarter; HQLA composition (accessed 24 October 2026)
- Federal Reserve, Review of the supervision and regulation of SVB, 28 April 2023: 8–10 March 2023 timeline, $21 billion sale, $1.8 billion loss, $2.25 billion raise, over $40 billion withdrawn on 9 March, over $100 billion expected on 10 March, 94% uninsured deposits, LCR and NSFR not yet applied, 9% and 17% HQLA shortfalls (accessed 24 October 2026)
- Federal Reserve press release, 12 March 2023: all depositors of SVB and Signature Bank protected; Bank Term Funding Program, loans up to one year, collateral at par (accessed 24 October 2026)
- Basel Committee, LCR standard, January 2013 and NSFR standard, October 2014: dates of the global standards; NSFR minimum from 1 January 2018 (accessed 24 October 2026)
- Basel Committee, Report on the 2023 banking turmoil: published 5 October 2023 (accessed 24 October 2026)