Liquidity Coverage Ratio (LCR)

Economics

LCR is the amount of High-Quality Liquid Assets (HQLAs) that financial institutions must have on hand to meet short-term obligations during market turmoil.
It results from updates to the Basel Accords, framed by the Basel Committee on Banking Supervision.
LCR decreases money supply as it requires banks to hold a larger proportion of highly liquid assets.

Established: 1935, under the Reserve Bank of India Act, 1934.
Headquarters: Mumbai, Maharashtra.
First Governor: Sir Osborne Smith (1935–1937).
Former Governor: Shaktikanta Das (2018–2024).
Present Governor: Sanjay Malhotra (since December 11, 2024).
Role: India's central bank responsible for regulating the monetary and financial system.
Primary Functions:
- Monetary Policy: Formulates policies to control inflation and stabilize the currency.
- Currency Issuance: Sole issuer of currency notes (except ₹1 notes and coins).
- Banker to the Government: Acts as the government's banker and manages public debt.
- Regulation of Banks: Supervises and regulates commercial banks, cooperative banks, and financial institutions.
- Foreign Exchange Management: Manages India’s foreign exchange reserves and stabilizes the rupee.