Amid outflow fears, RBI reviews LCR by carrying out special audits with banks

Recently, the Reserve Bank of India conducted special audits with banks to verify their holdings of eligible securities for maintaining the liquidity coverage ratio (LCR). This action coincides with the central bank's apprehension regarding potential sudden withdrawals via digital banking channels. Introduced post the 2008 global financial crisis, LCR mandates banks to retain specified amounts of government bonds that can be quickly sold to manage a theoretical 30-day stress period featuring significant cash outflows.