>[!summary]- Liquidity Coverage Ratio (LCR) > - [Timeline](#Timeline) > - [References](#References) ## Timeline 1. As part of post Global Financial Crisis (GFC) reforms, Basel Committee on Banking Supervision (BCBS) had introduced Liquidity Coverage Ratio (LCR), which requires banks to maintain High Quality Liquid Assets (HQLAs) to meet 30 days net outgo under stressed conditions. 1. It is considered a key part of Basel III Framework on Liquidity Standards. 2. LCR become a standard with effect from January January 1, 2015 2. To recall, as per Banking Regulation Act, 1949, the banks in India are already required to hold liquid assets to maintain ([SLR - Statutory Liquidity Ratio](SLR%20-%20Statutory%20Liquidity%20Ratio.md)). 3. Sep 2008 - BCBS published ‘Principles for Sound Liquidity Risk Management and Supervision’ as well as 4. Dec 2010 - BCBS published ‘Basel III : International Framework for Liquidity Risk Measurement, Standards and Monitoring’ 5. Feb 21, 2012 - RBI issued [draft guidelines on Liquidity Risk Management and Basel III Framework on Liquidity Standards](RBI_Guidelines_20120221_RBI%20Releases%20Draft%20Guidelines%20on%20Liquidity%20Risk%20Management%20and%20Basel%20III%20Framework%20on%20Liquidity%20Standards.pdf), based on above 2 documents, for comments and feedback. 6. [November 7, 2012](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7680&Mode=0) - ==RBI issued final guidelines ‘Liquidity Risk Management by Banks’ == 7. January 2013 - After an observation period since Dec-2010, BCBS revised the framework and published 'Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools'. 8. January 2014 - BCBS published 'Liquidity Coverage Ratio Disclosure Standards'. 9. April 1, 2014 - In the [First Bi-monthly Monetary Policy Statement, 2014-15](RBI_MPS_201404_1.pdf), RBI proposed to issue guidelines relating to Basel III LCR and Liquidity Risk Monitoring tools by end-May 2014 10. [June 09, 2014](RBI_Notification_20140609_Basel%20III%20Framework%20on%20Liquidity%20Standards%20–%20Liquidity%20Coverage%20Ratio%20(LCR),%20Liquidity%20Risk%20Monitoring%20Tools%20and%20LCR%20Disclosure%20Standards.pdf) *(withdrawn)* - ==RBI published the final guidelines on theBasel III Framework on Liquidity Standard – LCR, Liquidity Risk Monitoring Tools and LCR Disclosure Standards== 1. It also announced that he LCR will be introduced in a phased manner starting with a minimum requirement of 60% from January 1, 2015 and reaching minimum 100% on January 1, 2019. 11. [Nov 28, 2014](RBI_Notification_20141128_Basel%20III%20Framework%20on%20Liquidity%20Standards%20–%20Liquidity%20Coverage%20Ratio%20(LCR),%20Liquidity%20Risk%20Monitoring%20Tools%20and%20LCR%20Disclosure%20Standards.pdf) - RBI revised the guidelines, and allowed more proportion of assets within the mandatory SLR requirement to be reckoned as Level 1 High Quality Liquid Assets (HQLA) under the LCR. 1. As liquid assets under SLR and HQLAs under LCR are largely the same, RBI wanted to allow banks to use a progressively increasing proportion of the SLR securities for being considered as HQLAs for LCR so that the need to maintain liquid assets for both the requirements is optimised. 12. [March 31, 2015](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=9631&Mode=0) *(withdrawn)* - “Prudential Guidelines on Capital Adequacy and Liquidity Standards – Amendments.” 13. [March 23, 2016](RBI_Notification_20160323_Liquidity%20Risk%20Management%20&%20Basel%20III%20Framework%20on%20Liquidity%20Standards%20–%20Liquidity%20Coverage%20Ratio%20(LCR),%20Liquidity%20Risk%20Monitoring%20Tools%20and%20LCR%20Disclosure%20Standards.pdf) *(withdrawn)* - Certain provisions of these guidelines were amended 14. [July 21, 2016](RBI_Notification_20160721_Basel%20III%20Framework%20on%20Liquidity%20Standards%20–%20Liquidity%20Coverage%20Ratio%20(LCR),%20Liquidity%20Risk%20Monitoring%20Tools%20and%20LCR%20Disclosure%20Standards.pdf) *(withdrawn)* - RBI increased the total carve-out from SLR available to banks from 10% to 11% of their NDTL, by increasing the Government securities within the mandatory SLR requirement which can be reckoned as Level 1 HQLA under FALLCR from 8% to 9% of their NDTL 15. [August 02, 2017](RBI_Notification_20170802_Basel%20III%20Framework%20on%20Liquidity%20Standards%20–%20Liquidity%20Coverage%20Ratio%20(LCR),%20Liquidity%20Risk%20Monitoring%20Tools%20and%20LCR%20Disclosure%20Standard.pdf) *(withdrawn)* - Certain provisions of these guidelines were amended 16. [June 06, 2018](RBI_MPS_SDRP_20180606.pdf#page=1&selection=118,0,119,10) - RBI increased the total carve-out from the mandatory SLR requirement for the purpose of meeting LCR requirement from 11% to 13% of their NDTL, by increasing the Government securities within the mandatory SLR requirement which can be reckoned as Level 1 HQLA under FALLCR from 9% to 11% of their NDTL 1. 2% of NDTL allowed within SLR under MSF limits. 2. 9% of NDTL allowed within SLR allowed under the old FALLCR (Facility to Avail Liquidity for LCR) limit 3. \+ 2% _newly added_ to FALLCR in this June 2018 circular. = 13% total carve-out from the mandatory SLR for meeting LCR requirement. 17. [Sep 27, 2018](RBI_Notification_20180927_Basel%20III%20Framework%20on%20Liquidity%20Standards%20-%20Liquidity%20Coverage%20Ratio%20(LCR),%20Liquidity%20Risk%20Monitoring%20Tools%20and%20LCR%20Disclosure%20Standards.pdf) *(withdrawn)* - the HQLA carve-out from mandatory SLR, under FALLCR was increased to 13% from 11%, taking the total HQLA carve out from SLR available to banks from 13% to 15% of their NDTL. 18. [April 4, 2019](RBI_Notification_20190404_Basel%20III%20Framework%20on%20Liquidity%20Standards%20-%20Liquidity%20Coverage%20Ratio%20(LCR),%20Liquidity%20Risk%20Monitoring%20Tools%20and%20LCR%20Disclosure%20Standards.pdf) -  RBI decided to increase the Government securities within the mandatory SLR requirement which can be reckoned as Level 1 HQLA for meeting the LCR requirement, under FALLCR from 13% to 15% of NDTL in 4-stages, by April 1, 2020. 19. [April 17, 2020](RBI_Notification_20200417_Basel%20III%20Framework%20on%20Liquidity%20Standards%20–%20Liquidity%20Coverage%20Ratio%20(LCR).pdf) *(withdrawn)* - RBI allowed entire portion of the SLR securities for being considered as HQLAs for the meeting of Liquidity Coverage Ratio (LCR) requirement, a key part of Basel III Framework on Liquidity Standards. 1. With increase in MSF from 2 to 3% of banks' NDTL, and FALLCR at 15% of the bank's NDTL with effect from April 1, 2020, and reduction is SLR to 18% of NDTL from April 11, 2020, the total HQLA carve out from SLR available to banks was increased from 15% to 18% of their NDTL. 2. ==entire SLR-eligible assets held by banks were permitted to be reckoned as HQLAs for meeting LCR.== 3. In order to accommodate the burden on banks’ cash flows on account of the Covid19 pandemic, banks are permitted to gradually increase the maintenance of LCR 4. A short [note](https://docs.google.com/document/d/1aSwb8ZWTv2yqq6OluY4InsOFpgXZauvV/edit?usp=sharing&ouid=103380312897680205470&rtpof=true&sd=true) on this circular 20. [April 18, 2022](RBI_Notification_20220418_%20Basel%20III%20Framework%20on%20Liquidity%20Standards%20–%20Liquidity%20Coverage%20Ratio%20(LCR).pdf) *(withdrawn)* 1. MSF was reduced from 2% to 3% of NDTL from January 1, 2022 2. so RBI decided to increase the Government securities within the mandatory SLR requirement which can be reckoned as Level 1 HQLA for meeting LCR under FALLCR up to 16% of their NDTL 3. With this, the total HQLA carve-out from the mandatory SLR requirement for the purpose of meeting LCR requirement remained unchanged at 18 per cent of the NDTL *(2% MSF + 16% FALLCR)* 21. [July 25, 2024](RBI_Press%20Release_20240725_Draft%20guidelines-%20Basel%20III%20Framework%20on%20Liquidity%20Standards%20–%20Liquidity%20Coverage%20Ratio%20(LCR)_Draft%20Circular.pdf) - RBI proposed through a draft circular certain amendments to the LCR framework after a period of 10 years, as banking had undergone rapid transformation in recent years. 22. [Apr 21, 2025](RBI_Press%20Release_20250421_Amendments%20to%20Liquidity%20Coverage%20Ratio%20(LCR)%20Framework.pdf) *(withdrawn)* - Based on the draft circular, [amendments](RBI_Notification_20250421_Basel%20III%20Framework%20on%20Liquidity%20Standards%20–%20Liquidity%20Coverage%20Ratio%20(LCR)%20–%20Review%20of%20haircuts%20on%20High%20Quality%20Liquid%20Assets%20(HQLA)%20and%20review%20of%20composition%20and%20run-off%20rates%20on%20certain%20categories%20of%20deposits.pdf) to Liquidity Coverage Ratio (LCR) Framework were announced, to be effective from April 1, 2026. 1. Extant extant instructions in June 9, 2014, and March 23, 2016 were amended. 23. November 28, 2025 - Guidelines on LCR were subsumed into the [Reserve Bank of India (Commercial Banks – Asset Liability Management) Directions, 2025.](https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=13147) > [!normalg] > >[Box VI.3-Basel III: Countercyclical Capital Buffer](RBI_Annual%20Report_2014.pdf#page=106&selection=74,0,75,41) in RBI's Annual Report-2014 > >[Box VI.4-Initiatives taken by the Reserve Bank to migrate towards the Basel III norms](RBI_Annual%20Report_2011.pdf#page=122&selection=49,0,50,76) in RBI's Annual Report 2011 ## Directions 1. [Reserve Bank of India (Commercial Banks – Asset Liability Management) Directions, 2025](https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=13147), dated November 28, 2025 ## References ### [[Speeches & Media Interactions|Speeches]] 1. Duvvuri Subbarao. (Sep 04, 2012). ==Basel III in International and Indian Contexts Ten Questions We Should Know the Answers For== - Inaugural Address by Dr. Duvvuri Subbarao, Governor, Reserve Bank of India at the Annual FICCI - IBA Banking Conference at Mumbai on September 04, 2012. [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=725) 2. N.S. Vishwanathan. (Sep 04, 2015). ==Basel III Implementation- Challenges for Indian banking system== - Shri N.S. Vishwanathan, Executive Director – August 31, 2015 – Associated Chambers of Commerce & Industry of India and National Institute of Bank Management. [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=972) 3. N.S. Vishwanathan. (Jan 01, 2016). ==Basel III Liquidity Risk Framework – Implementation and Way Forward== - Shri N.S. Vishwanathan, Executive Director - November 27, 2015, Hyderabad. [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=984) 4. RBI. Nov 24, 2016. ==Pioneering Best Practices in Banking: India’s Record==. (Shri R. Gandhi, Deputy Governor - November 24, 2016 - at the 33rd Sir Purshotamdas Thakurdas Memorial Lecture, Mumbai). [pdf](RBI_Speeches_20161124_Pioneering%20Best%20Practices%20in%20Banking-%20India’s%20Record.pdf) 5. B. Mahapatra. (Mar 03, 2012). ==Implications of Basel III for Capital, Liquidity and Profitability of Banks== - Address of Shri B. Mahapatra, Executive Director, Reserve Bank of India on March 3, 2012 at the National Conference on Emerging Macro Environment, Regulatory Changes and Bank Competitiveness, organized by the National Institute of Bank Management, on March 3-4, 2012 at Pune. [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=673) ### [[Publications (Data Releases) & Research#Research|Research]] 1. Sitikantha Pattanaik, Rajesh Kavediya, Angshuman Hait. (Feb 22, 2017). The Unintended Side Effects of Basel III Liquidity Regulations on the Operating Target of Monetary Policy. RBI Working Paper Series No. 02. [pdf](RBI_Research_WP_20170222_RBI%20WPS%20(DEPR)-%20The%20Unintended%20Side%20Effects%20of%20Basel%20III%20Liquidity%20Regulations%20on%20the%20Operating%20Target%20of%20Monetary%20Policy.pdf)