RBI to stick to higher digital deposit buffer proposal

MUMBAI, Sept 11 (Reuters): India's central bank will stick to its plan to ask lenders to set aside more funds for digitally linked deposits, despite the industry's plea for a lower buffer to avoid a hit to their liquidity, three sources familiar with the matter told Reuters.

In July, the Reserve Bank of India (RBI) proposed that banks set aside an additional 5.0 per cent 'run-off factor' on digitally accessible retail deposits to better manage risks in case of quick and heavy withdrawals via internet or mobile banking.

The norms, due to be enforced next April, are expected to weigh on banks' liquidity coverage ratios (LCR) -- the amount of highly liquid assets available to meet short-term obligations-and was a key reason for the Indian Banks' Association (IBA) urging that the run-off be cut to 2 per cent or 3 per cent.