MUMBAI (Reuters) -The Reserve Bank of India (RBI) will defer the implementation of three proposed crucial banking regulations, giving lenders ample time to prepare for the changes, the central bank governor said on Friday.
The central bank had proposed tighter norms for lending to infrastructure projects, and proposed that banks set aside more funds for digitally-linked deposits, and plans to introduce a framework for ‘expected credit loss’.
The rules had led to a pushback from the federal government, which feared they would hit the flow of credit. In rare public comments, the government had blamed tight banking regulations for part of the economic slowdown.
“We do not want to cause any disruption; we will ensure a smooth transition,” RBI Governor Sanjay Malhotra said in a post-policy press conference in Mumbai.
The new proposals on liquidity coverage, which would have forced lenders to set aside more funds against digital deposits, will be deferred by at least a year till March 31, 2026, Malhotra said.
Rules asking banks to set aside more provisions against under-construction projects will also be delayed, he said.
An overlap between these rules and a separate plan to move banks to an ‘expected credit loss’ framework of making provisions against doubtful assets is also being reviewed, the governor said.
“We want to make it (implementation) very smooth and it will be phased. We don’t want all norms to kick in at once.”
Shares of project financiers such as Power Finance Corp and REC rose about 3% each. Financials and banks dropped about 0.5% each.
(Reporting by Siddhi Nayak; Editing by Mrigank Dhaniwala)
