To ensure that the repayment moratorium to help individuals and businesses to tide over the coronavirus-triggered disruptions does not land banks in a liquidity crisis, the RBI on Friday lowered the liquidity coverage ratio (LCR) to 80 per cent from 100 per cent with immediate effect.
The LCR requires banks to hold enough high-quality liquid assets such as short-term government bonds that can be sold to fund a stress scenario. Banks are required to hold LCR which is 100 per cent equivalent of projected cash outflows during the 30-day stress scenario.
Addressing the media via video on Friday, RBI Governor Shaktikanta Das said "to ease the liquidity position at the level of individual institutions, the LCR requirement for commercial banks is being brought down from 100 to 80 percent with immediate effect."