MUMBAI: In the June quarter, most Indian banks increased their liquidity coverage ratio (LCR), a key metric capturing a lender's ability to meet sudden demand for funds, to suggest the evident retail tilt in deposit composition amid weak credit offtake across the lending spectrum.
To maintain LCR-a regulatory requirement to limit the impact of sudden outflows in deposits-banks buy the stock of high-quality liquid assets (HQLA) that can be liquidated to pay depositors. It is calculated as the ratio of HQLA to total net cash outflows expected over the next 30 days.
HDFC Bank raised its LCR by 6 percentage points to 124%, Yes Bank by 10 percentage points to 135%, while Canara Bank saw the largest increase, with its LCR rising to 144% from 125% in Q4FY25. On average, LCR rose by approximately 6.5 percentage points during the June quarter of FY26, showed an analysis of the earnings statements.
"When share of retail deposits increases, LCR would be high because run-off factor for retail deposits is lower," said AM Karthik, senior vice president, financial sector ratings, ICRA. "Additionally, with credit growth slow, banks are investing in assets that qualify as HQLA, so there is a push for higher LCR from both sides."
While retail deposits grew, wholesale and corporate deposits declined. Yes Bank's wholesale deposits fell 13.9% to ?1.07 lakh crore compared with the previous quarter. Bandhan Bank's wholesale deposits rose 4% to ?49,147 crore. HDFC Bank reported a modest 5.2% growth in wholesale deposits to ?9.6 lakh crore in Q1FY26 from a year ago.
The Reserve Bank of India ( RBI) has mandated that from April 1, 2026, banks maintain a higher run-off factor of 2.5% for retail and small business deposits that are accessible via internet and mobile banking. The run-off factor represents the assumed rate of sudden withdrawals.
Bankers noted that retail deposits are considered more stable, reducing the likelihood of large outflows and contributing to higher LCRs. In addition, slower credit growth and surplus liquidity have led banks to invest excess funds in HQLA-eligible assets.
HDFC Bank reported a 1.7% on-year growth in corporate advances for June quarter, a decline from 18.8% growth in same period last year. ICICI Bank's domestic corporate loan book rose by 7.5%, down from 10.3% previously.
To maintain LCR-a regulatory requirement to limit the impact of sudden outflows in deposits-banks buy the stock of high-quality liquid assets (HQLA) that can be liquidated to pay depositors. It is calculated as the ratio of HQLA to total net cash outflows expected over the next 30 days.
HDFC Bank raised its LCR by 6 percentage points to 124%, Yes Bank by 10 percentage points to 135%, while Canara Bank saw the largest increase, with its LCR rising to 144% from 125% in Q4FY25. On average, LCR rose by approximately 6.5 percentage points during the June quarter of FY26, showed an analysis of the earnings statements.
"When share of retail deposits increases, LCR would be high because run-off factor for retail deposits is lower," said AM Karthik, senior vice president, financial sector ratings, ICRA. "Additionally, with credit growth slow, banks are investing in assets that qualify as HQLA, so there is a push for higher LCR from both sides."
While retail deposits grew, wholesale and corporate deposits declined. Yes Bank's wholesale deposits fell 13.9% to ?1.07 lakh crore compared with the previous quarter. Bandhan Bank's wholesale deposits rose 4% to ?49,147 crore. HDFC Bank reported a modest 5.2% growth in wholesale deposits to ?9.6 lakh crore in Q1FY26 from a year ago.
The Reserve Bank of India ( RBI) has mandated that from April 1, 2026, banks maintain a higher run-off factor of 2.5% for retail and small business deposits that are accessible via internet and mobile banking. The run-off factor represents the assumed rate of sudden withdrawals.
Bankers noted that retail deposits are considered more stable, reducing the likelihood of large outflows and contributing to higher LCRs. In addition, slower credit growth and surplus liquidity have led banks to invest excess funds in HQLA-eligible assets.
HDFC Bank reported a 1.7% on-year growth in corporate advances for June quarter, a decline from 18.8% growth in same period last year. ICICI Bank's domestic corporate loan book rose by 7.5%, down from 10.3% previously.
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