Module: | MODULE B: RISK MANAGEMENT
Q464: Scenario: XYZ Bank is recalculating its Liquidity Coverage Ratio for the financial year beginning April 2025. The bank holds a massive portfolio of stable retail deposits that are enabled with Internet and Mobile Banking (IMB) facilities. Based on the RBI guidelines effective during the 2025-2026 period, consider the following statements regarding the correct regulatory actions:
1. The bank must apply an increased run-off factor of 10 percent for stable retail deposits that are enabled with IMB.
2. The bank must apply an increased run-off factor of 15 percent for less stable retail deposits that are enabled with IMB.
3. The bank is permitted to treat IMB-enabled deposits identically to traditional branch-only deposits for the purpose of LCR calculations.
Which of the statements given above is/are correct?
2. The bank must apply an increased run-off factor of 15 percent for less stable retail deposits that are enabled with IMB.
3. The bank is permitted to treat IMB-enabled deposits identically to traditional branch-only deposits for the purpose of LCR calculations.
Which of the statements given above is/are correct?
✅ Correct Answer: A
The correct answer is A. Statement 1 is correct: Following the RBI guidelines effective from April 1, 2025, digital banking risks required a recalibration of LCR assumptions.
Stable retail deposits that are enabled with Internet and Mobile Banking (IMB) facilities see their run-off factor increased by an additional 5 percent, bringing the total run-off requirement to 10 percent.
Statement 2 is correct: Similarly, less stable retail deposits that are enabled with IMB facilities have their run-off factor increased from the baseline 10 percent to a stricter 15 percent.
Statement 3 is incorrect: The core purpose of the 2025 amendments is to explicitly prohibit banks from treating IMB-enabled deposits identically to traditional, branch-dependent deposits.
The ease of digital transfers fundamentally alters the 30-day stress outflow projections, requiring distinct segregation and higher capital provisioning.
Stable retail deposits that are enabled with Internet and Mobile Banking (IMB) facilities see their run-off factor increased by an additional 5 percent, bringing the total run-off requirement to 10 percent.
Statement 2 is correct: Similarly, less stable retail deposits that are enabled with IMB facilities have their run-off factor increased from the baseline 10 percent to a stricter 15 percent.
Statement 3 is incorrect: The core purpose of the 2025 amendments is to explicitly prohibit banks from treating IMB-enabled deposits identically to traditional, branch-dependent deposits.
The ease of digital transfers fundamentally alters the 30-day stress outflow projections, requiring distinct segregation and higher capital provisioning.