New Delhi, Jan. 31 -- The chickens are coming home to roost. That might seem an inappropriate statement to make in the context of a central bank. But it may uncannily be true of the Reserve Bank of India (RBI) today. Why? Because the liquidity tightness of the past few weeks that it is currently trying to address is partly, though not entirely, the consequence of its own proposed new rules on the liquidity coverage ratio (LCR) of banks.

In July 2024, RBI had suggested that banks assign an additional 5% 'run-off factor'-broadly, the portion of deposits kept handy to cover a surge in withdrawals-for retail deposits that can be accessed via internet and mobile banking. This category is further split into 'stable' and 'unstable' deposits, wi...