RBI Draft Guidelines Raise Run-Off Factor to 10%

The Reserve Bank of India (RBI) has issued draft guidelines to boost the liquidity resilience of banks amidst increased digital banking risks. Effective from April 2025, banks must assign a higher run-off factor of 10% for retail deposits made via internet and mobile banking, up from the initially proposed 5%. This move aims to safeguard against potential sudden outflows, similar to the Silicon Valley Bank collapse. As a result, banks will need to invest more in government securities and may face pressure on credit growth and interest margins. Concurrently, banks are adjusting deposit plans to attract more stable funds, with some, like HDFC Bank, raising fixed deposit rates. Analysts expect these changes to significantly impact banks' liquidity management and deposit rates.