RBI to postpone digital deposit buffer mandate for banks by 1 year

Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Friday that the central bank will delay the implementation of its proposal requiring lenders to allocate additional funds for digitally accessible deposits. The revised deadline has been pushed back by a year to March 2026, according to a report by Reuters.

 

“The impact analysis of norms has been done, but we are reviewing it again based on feedback received. We don't want to cause any disruption from implementation of new norms,” said Malhotra.

 

What is RBI’s digital deposit proposal?

 

Originally proposed in July 2024, the RBI’s guidelines required banks to set aside an additional 5 per cent ‘run-off factor’ on digitally accessible retail deposits. The run-off factor accounts for potential short-term withdrawals made via internet or mobile banking, ensuring banks are better prepared for financial stress.

 

 

While the guidelines were expected to take effect from the financial year 2026-27, some banks estimate that this move could increase credit costs by 0.5 per cent to 1.75 per cent. Malhotra has indicated that the RBI is still reviewing draft guidelines related to expected credit loss and project financing, suggesting further regulatory refinements in the coming months.

 

RBI’s first repo rate cut in five years

 

In its Monetary Policy Committee (MPC) meeting on Friday, the RBI announced its first repo rate cut in nearly five years to boost a sluggish economy. The repo rate has been reduced by 25 basis points, bringing it down to 6.25 per cent from 6.5 per cent.

 

The decision was unanimous, with all six MPC members voting in favor of the rate cut while maintaining a neutral stance on monetary policy.

 

This marks the first rate cut after 11 consecutive meetings where rates remained unchanged. Previously, the RBI had hiked rates by 250 basis points between May 2022 and February 2023 to curb inflation.

 

Economic outlook and inflation target

 

The Indian economy is expected to grow at its slowest pace in four years, prompting the RBI to introduce monetary easing measures. Despite signs of recovery, inflation remains a concern, but the central bank believes there is now room for gradual policy relaxation.

 

“The MPC remains focused on supporting growth while ensuring that inflation aligns with our medium-term target of 4 per cent,” Malhotra stated in his first policy review since taking charge in December 2024.

What’s next for the RBI?

With delayed digital deposit norms, a fresh repo rate cut, and ongoing policy reviews, the RBI is navigating a balancing act—supporting economic growth while managing financial risks. Market participants and banks will closely watch for further regulatory announcements in the coming months.

 

[With inputs from agencies]