The implications of these rules are far – reaching and extend well beyond the boundaries of the banking institutions themselves. For banks, the new RBI rules present both challenges and opportunities. On one hand, they must invest significant resources in terms of time, manpower, and technology to ensure compliance. This may involve upgrading their internal systems, enhancing risk management frameworks, and training their staff to meet the new regulatory requirements. On the other hand, compliance with these rules can also enhance their reputation, improve operational efficiency, and reduce the likelihood of financial distress.
Liquidity Coverage Ratio (LCR) Norms
Stricter Norms for Digital Deposits
Starting from April 1, 2026, the RBI is implementing stricter norms for digital retail and small business deposits. The assumed withdrawal risk for these deposits is being increased. For stable digital retail deposits, the risk factor is going up from 5% to 7.5%, and for less stable digital retail deposits, it is rising from 10% to 12.5%. This change is in response to the growing trend of digital banking in India. With more and more customers using mobile and internet banking, the RBI aims to ensure that banks are better prepared for potential sudden withdrawals. For example, during times of economic uncertainty or a financial crisis, digital banking customers may be more likely to withdraw their funds quickly. By increasing the assumed withdrawal risk, banks will have to hold more liquid assets against these deposits.
Relaxed Guidelines for Wholesale Funding
On the other hand, the RBI is relaxing the guidelines for wholesale funding. For wholesale non – financial entities such as trusts and NGOs, the run – off factor is being reduced from 100% to 40%. This change is expected to free up a significant amount of funds, estimated to be around ₹2.7 – 3 lakh crore. This freed – up capital will make more funds available for bank lending, especially in rural and MSME segments. Rural areas often struggle to access sufficient credit for agricultural and small – scale industrial activities. MSMEs are the backbone of the Indian economy, and this new rule will help them get more loans for expansion and day – to – day operations.
Home Loan Borrower – Friendly Rules
Return of Property Documents
The RBI now mandates that all original property documents must be returned to the borrower within 30 days of loan repayment. This is a major relief for home loan borrowers. In the past, some banks used to delay the return of property documents, causing inconvenience to borrowers. If a bank fails to return the documents within the stipulated time, it will attract a penalty of ₹5,000 per day. This rule ensures that once a borrower has fulfilled their loan obligations, they can fully own their property without any unnecessary delays.
Borrower Protections
Banks are now required to clearly disclose all fees and foreclosure charges upfront. This transparency helps borrowers make more informed decisions. For example, a borrower can now compare the fees and charges of different banks before taking a home loan. Additionally, in case of financial hardship, banks must offer EMI relief options to borrowers. These options can include a longer tenure for the loan, which will reduce the monthly EMI amount, or a temporary moratorium where the borrower can stop paying the EMI for a certain period without being penalized.
Banking for Minors Aged 10+
Children aged 10 and above can now operate bank accounts independently, subject to the internal policies of the bank. This includes having access to internet banking and ATM cards. This new rule is a step towards financial inclusion and teaching children about money management from an early age. A 10 – year – old can now deposit their pocket money, check their account balance online, and learn about the concept of savings. However, banks have the right to set limits and conditions to ensure the safety of the minor’s account.
Stricter Cash Transaction Rules
Higher Thresholds Requiring Identification
The RBI is pushing for a cashless economy and better tax compliance. Now, for cash withdrawals or deposits above ₹50,000 in a single day, customers need to provide their PAN or Aadhaar details. This helps the government track large cash transactions and prevent tax evasion. For example, a businessperson who used to deposit large amounts of cash without proper identification will now have to disclose their identity.
Monthly Withdrawal Caps and TDS
If a customer exceeds ₹20 lakh per month in cash withdrawals, they may face TDS (Tax Deducted at Source) under Section 194N of the Income Tax Act. Also, businesses cannot claim expenses over ₹10,000 per day in cash (per party) for tax audits. This discourages businesses from making large cash payments, which can sometimes be used to hide income or evade taxes.
Priority Sector Lending Norms Enhanced
Higher Caps for Key Sectors
To boost inclusive credit and green finance, the RBI has updated the Priority Sector Lending (PSL) guidelines effective April 1, 2025. There are higher PSL caps for sectors like housing, renewable energy, and education. In the housing sector, more funds will be available for affordable housing projects, making it easier for low – income families to own a home. For renewable energy, this will encourage more investment in solar, wind, and other clean energy sources. In the education sector, students will have better access to educational loans.
Requirements for Urban Cooperative Banks
Urban cooperative banks must now allocate 60% of their adjusted net credit to PSL sectors. This ensures that these banks also contribute to the development of priority sectors in the economy. Urban cooperative banks often have a close connection with the local community, and this rule will help them channel funds towards areas that need it the most.
Conclusion
The new RBI rules for banks are a comprehensive set of regulations aimed at strengthening the banking sector, protecting customers, and promoting economic growth. The changes in the LCR norms will enhance the liquidity management of banks, while the home loan rules will safeguard borrowers’ interests. The rules for minors’ accounts, cash transactions, digital security, and priority sector lending all contribute to a more inclusive, secure, and efficient banking ecosystem in India. Banks will need to adapt to these new rules, and customers should also be aware of how these changes will impact their banking experience. As the financial landscape continues to evolve, the RBI’s regulations will play a crucial role in maintaining stability and progress.
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