India’s postponed LCR rules a win for banks’ margins, loan growth

The rules require banks to shore up more liquidity on retail deposits.

India’s delay of implementing new coverage rules to at least 2026 comes as a relief for the local banking sector.

On 7 February 2025, the Reserve Bank of India (RBI) deferred the implementation of proposed liquidity coverage ratio (LCR) norms to at least 31 March 2026. It was previously slated for 1 April 2025.

The rules would require banks to shore up more liquidity to meet new rules— an additional 5% “run-off factor” on retail deposits.

This would have strained banks’ net interest margins (NIMs) and reduced potential loan growth, according to CreditSights, a Fitch Solutions company.

Banks are facing a backdrop of tight liquidity and macroeconomic slowdown in India, the report noted.

The RBI also deferred the implementation of project finance norms, which were set to be introduced on 31 March 2025, to at least 31 March 2026. The project finance norms require lenders to set aside provisions on 5% of all existing and fresh project loans which are in the construction phase, with reductions based on project progress.