Revisions to the Reserve Bank of India’s buffer guidelines for online bank deposits to combat the risk of digital deposits

In response to the growing impact of digital deposits, such as e-banking, mobile wallets, and fast transfers, the regulatory environment around banking in India has subtly changed. The RBI said in April 2025 that it will lower the initially suggested 5% buffer to 2.5% and postpone the complete implementation deadline to April 1, 2026, in order to modify the mandatory “run-off” buffer norm for digitally accessible deposits.

What is occurring?

Banks take on a greater liquidity/run-off risk when consumers deposit money that can be quickly withdrawn online (i.e., several depositors withdrawing at once). All around the world, regulators demand that banks reserve a buffer to withstand this. When the industry protested, the RBI allowed a lesser 2.5% buffer and postponed enforcement of its 5% run-off factor proposal for digital retail deposits.

The significance of the subject (from a regulatory and banking law perspective):

• It illustrates how deposits and digital behaviour are influencing regulatory requirements, rather than only loans, assets, and non-performing assets.

• This law affects how banks (including cooperative and small banks) manage liquidity, comply with policies, and oversee the internal operations of digital deposit products.

• For compliance teams and legal counsel, this rule emphasizes the necessity of reviewing risk modelling, contractual terms, customer-deposit product design, liquidity policies, and disclosures under the regulatory framework.

• To clients: Notwithstanding its technicality, this rule ultimately influences the safety of deposit products and the way banks may offer or price digital deposit plans in light of regulatory costs.

Key Legal / Governance Points & Unanswered Questions:

• RBI guidelines will need to provide precise descriptions of the differences between “digitally accessible retail deposits” and traditional deposits.

• By April 2026, banks need to make sure that their systems, disclosures, and compliance structures are up to date.

• Given the speed of digital disruption, is the smaller buffer (2.5% compared to the initial 5% proposal) adequate? This calls into question the calibration and supervision of supervisors.

• In order to preserve margin in the face of increased internal expenses, banks may change the conditions of their deposit products, increase fees, or alter features.

• Multidisciplinary legal guidance will be required because the law/regulation in this area intersects with fintech, payments, banking technology, and deposit insurance frameworks (e.g., customers access via non-banked channels, deposit portability, digital-only banks).

Conclusion:

This regulatory adjustment by the RBI is a fundamental adaptation of banking law to the digital age, even though it does not garner the same attention as deposit-nomination reforms or significant structural adjustments. It highlights how digital behavior, deposit-side concerns, and bank liquidity modeling are now squarely in the legal compliance limelight. Anyone involved in banking or finance legislation should keep a careful eye on this development, particularly if they work with deposit products, digital banking, or bank governance.