RBI launches LCR‑based window offering free deposit rates

The RBI has opened an LCR‑based window that allows banks to obtain deposits at zero cost, effectively creating a source of ‘free’ funding. The window is linked to the liquidity coverage ratio, a regulatory metric that ensures banks hold high‑quality liquid assets.

Under the new arrangement, banks can place eligible assets against the LCR requirement and receive corresponding deposits without paying interest. This mechanism is intended to improve liquidity buffers while reducing the cost of funds for participating banks.

Analysts note that the lower funding cost may translate into more competitive loan rates for corporates and consumers, although the impact will depend on how banks choose to pass on the savings. The RBI’s move also reflects a broader effort to fine‑tune monetary policy tools in a low‑rate environment.

The window is expected to be operational shortly, with banks required to meet eligibility criteria set by the central bank. Ongoing monitoring will assess the facility’s effectiveness in enhancing liquidity and influencing credit growth.