(Bloomberg) — Some of India’s largest lenders are planning to request concessions from the new head of the nation’s central bank regarding proposed liquidity regulations, arguing the rules could hamper efforts to boost lending, according to people familiar with the developments.
Banks plan to urge the Reserve Bank of India to delay the implementation of the new liquidity coverage ratio norms, currently due to take effect on April 1, according to the people, who declined to be identified discussing private matters. The request will be made through the Confederation of Indian Industry, which will meet recently-appointed RBI Governor Sanjay Malhotra in the coming days, the people said.
The tighter norms, announced in July by Malhotra’s predecessor, mandate banks to park a larger portion of their deposits in sovereign bonds as a buffer against sudden withdrawals in the age of digital banking. However, implementing them would add to the challenges faced by lenders already grappling with a cash squeeze in the banking system.
To be sure, the RBI did cut the cash reserve ratio — the proportion of deposits that banks must set aside with the central bank — in its December meeting, and this month stepped up cash injections via repo operations. Still, bankers are calling for more measures as deposit growth slows and economic growth falters.
