The Liquidity Coverage Ratio (LCR) is a key regulatory standard aimed at ensuring that banks maintain a sufficient buffer of high-quality liquid assets (HQLA) to meet short-term liquidity needs during financial stress. It is a global benchmark introduced post-2008 financial crisis under Basel III norms, and is widely adopted to safeguard banking stability.

RBI’s Latest Amendments to the LCR Framework

On Monday, the Reserve Bank of India (RBI) announced amendments to its existing LCR framework. A key update involves introducing an additional 2.5% run-off rate for deposits that are accessible via internet and mobile banking. This update is applicable to both retail and small business customer deposits, indicating RBI’s growing attention to the evolving dynamics of digital banking.

Impact Analysis and Aggregate Improvements

The RBI conducted an impact assessment based on data as of December 31, 2024. According to the central bank, the net impact of these measures is an estimated 6 percentage point improvement in the LCR at the aggregate level. Despite the revisions, all banks are expected to comfortably meet the existing minimum regulatory LCR thresholds.

Aligning with Global Standards

The central bank stated that the revision will further align India’s liquidity risk management norms with global standards, such as those under Basel III. At the same time, the RBI has taken care to ensure that the transition is non-disruptive for the banking ecosystem. These enhancements aim to strengthen liquidity resilience without creating operational shocks.

Lower Run-Off Rates for Select Non-Financial Entities

Another significant change is the revision in the run-off rate for certain types of non-financial entities. Trusts (including educational, charitable and religious), partnerships, and Limited Liability Partnerships (LLPs) will now be subject to a reduced run-off rate of 40%, down from the current 100%. This suggests RBI’s recognition of the relatively stable deposit behaviour of these institutions.

Read More: RBI Governor Flags Liquidity Risks in India’s Money Market.

Conclusion

To enable a smooth transition, the RBI has provided banks with ample time to update their internal systems and processes. The revised LCR guidelines will come into effect from April 1, 2026. This advance notice ensures operational readiness while maintaining regulatory clarity.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

The Unified Pension Scheme (UPS) was launched on April 1, 2025, as an alternative to the existing market-linked National Pension System (NPS). Aimed primarily at central government employees, the scheme guarantees a defined pension amount post-retirement. However, despite the promise of stability, the initial response has been tepid.

A Modest Start Triggers Government Concern

Within the first 2 weeks of UPS being made available, just over 1,500 central government employees opted in — a mere 0.05% of the 2.7 million enrolled under NPS since 2004. This modest uptake prompted the finance ministry to write to the pay and accounts offices (PAOs) of central ministries, requesting urgent action for smoother and faster implementation. Departments have been advised to sensitise staff and ensure a time-bound roll-out of the new scheme.

Key Features of the UPS

UPS guarantees a pension equivalent to 50% of the last 12 months’ average basic pay for employees who complete at least 25 years of service. This benefit is fully indexed to inflation, offering a measure of financial stability in retirement. However, the scheme lacks a capital return feature, making it fundamentally different from the NPS.

Some other important features of UPS include:

• Employee Contribution: 10% of basic pay plus Dearness Allowance (DA).
• Government Contribution: 18.5%, up from 14% under NPS.
• Eligibility: Existing employees and retirees before March 31, 2025, may opt in until June 30, 2025.
• Irrevocability: New employees joining after April 1 must make a final, irrevocable choice within 30 days of joining.

Read More: Unified Pension Scheme from April 1: Check Who Can Get 50% Guaranteed Pension?.

Online and Offline Access for Employees

To simplify the enrolment process, forms are available both online and offline. The online portal is managed by Protean CRA and can be accessed at https://npscra.nsdl.co.in. Drawing and Disbursing Officers (DDOs) are also required to activate their credentials with CRA to facilitate the enrolment process through the system.

Factors Influencing Employee Decisions

Central government employees are currently weighing the long-term benefits of the NPS, which may offer higher individual corpus value, against the inflation-protected certainty of UPS. One area of concern for many is the absence of capital return in UPS and the irrevocability of the decision once opted.

Additionally, if an employee opts to withdraw up to 60% of the corpus in lump sum after retirement, the guaranteed pension under UPS will be proportionately reduced. This differs from NPS, where the structure may allow for a comparatively larger residual annuity corpus.

Conclusion: Early Days for UPS

It is still early days for the Unified Pension Scheme. With the enrolment window open until June 30, 2025, for existing and retired employees, uptake may increase as awareness improves. The Finance Ministry’s directive to expedite implementation reflects its commitment to making UPS a viable alternative to the existing pension structure.

While the final decision lies with individual employees, understanding the core differences between UPS and NPS is essential before making a choice that will shape their post-retirement financial future.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

As of January 2025, a joint report by CAMS and the Confederation of Indian Industry (CII) reveals that nearly half of the mutual fund investors in B30 (beyond top 30) cities—47% or 98 lakh out of 2.08 crore—are invested in just 1 scheme. This suggests a concentrated approach or possibly a nascent stage of financial literacy in these locations.

Another 20% (42 lakh investors) have exposure to 2 mutual fund schemes, while 11% (23 lakh) are invested in 3 schemes. Interestingly, the proportion of investors with diversified portfolios— 4 or more schemes—has increased from 20% in March 2023 to 22% (45 lakh) by January 2025.

Fund House Preferences Reflect Strong Brand Loyalty

The report also underscores a strong brand preference among investors. About 61% or 1.3 crore B30 investors are associated with a single fund house. A further 19% (40 lakh) have exposure to 2 fund houses, while 10% (20 lakh) are invested with 3. Only 6% or 12 lakh investors have allocated assets across 5 or more fund houses, highlighting limited diversification at the fund house level.

Rapid Growth in Investor Base

Between March 2023 and January 2025, the mutual fund investor base in B30 cities has grown significantly, from 1.03 crore to 2.08 crore, clocking a compound annual growth rate (CAGR) of 36%. In contrast, T30 cities have seen a 22% CAGR during the same period, indicating a faster adoption of mutual fund investments in emerging cities.

SIP Registrations See Widespread Surge

Systematic Investment Plans (SIPs) have witnessed increased traction in B30 cities. The share of B30 locations in new SIP registrations rose from 49% in FY23 to 56% in FY25 (up to January 2025).

In the top 10 B30 cities such as Cochin, Dhanbad and Aurangabad, SIP registrations have grown at a CAGR of 45% in 2 years, contributing to 7% of the new SIP count in FY25. The next 25 B30 cities, including Visakhapatnam, Jalandhar and Jodhpur, accounted for 18% of new SIPs. Another 22% came from the subsequent 50 cities, including Gandhinagar and Durgapur.

The remaining 100 B30 cities (e.g., Panchkula, Bankura, Gandhidham) contributed 29% of SIPs, while smaller towns such as Wardha, Haldia and Bettiah contributed 24%, recording the highest CAGR of 74% in SIP registrations.

SIP Registrations by Distribution Channel

New SIPs in B30 cities have increased from 1.11 crore in FY23 to 2.74 crore in FY25. The share of direct plan SIPs has increased from 33% to 49% during this time, with 1.36 crore SIPs in FY25 coming through direct plans.

Meanwhile, Mutual Fund Distributors (MFDs) saw their share decline from 28% in FY23 to 16% in FY25, indicating a growing preference for self-directed investing.

Read More: SIP Stoppage Ratio Hits Record High in March 2025: Over 51 Lakh SIPs Discontinued. 

Distributor-wise Gross Sales in Equity Schemes

In terms of gross equity sales in B30 cities, direct plans accounted for 17% in FY25, up from 10% in FY23. MFDs witnessed a decrease in share from 39% to 31% during the same period. National distributors maintained a stable share of 13% over both years.

Sharp Growth in B30 Assets Under Management

B30 Assets Under Management (AUM) rose from ₹6.8 lakh crore in January 2023 to ₹12.5 lakh crore by March 2025, representing a 39% CAGR. Equity AUM in B30 cities saw a robust CAGR of 46%, increasing from ₹5.4 lakh crore to ₹10.8 lakh crore.

Debt and cash categories registered 6% CAGR each, while hybrid, gold and other asset classes surged with a 50% CAGR, showing rising interest in alternative categories.

Asset Allocation Patterns Among B30 Investors

A significant 74% of B30 investors are solely invested in equity schemes, pointing towards low diversification. Only 24% have exposure to multiple asset classes. Meanwhile, just 1% each are invested exclusively in debt or liquid schemes.

Gender-Based Distribution of Investors

Female participation in B30 cities stands at 28%, trailing behind the 35% representation seen in T30 cities. This indicates a scope for improved financial inclusion among women in smaller towns.

Investment Holdings: How Much Are B30 Investors Allocating?

The report provides a detailed breakdown of AUM distribution among B30 investors:

• 32% have holdings below ₹10,000

• 21% have holdings between ₹10,000–₹50,000

• 10% fall in the ₹50,000–₹1 lakh bracket

• 22% hold assets worth ₹1 lakh–₹5 lakh

• 6% are in the ₹5 lakh–₹10 lakh range

• 5% have holdings between ₹10 lakh–₹25 lakh

• 2% are in the ₹25 lakh–₹1 crore bracket

• 0.3% have portfolios exceeding ₹1 crore

This shows that while a majority of investors have relatively modest investments, a small segment is building substantial wealth through mutual funds.

Age-Wise Investor Demographics

The report also maps out the age distribution of B30 investors:

• The 31–40 age group forms the largest segment at 30%

• The 20–30 bracket follows closely at 26%, and has also recorded the highest growth

• 41–50-year-olds comprise 17% of the investor base

• The above-60 age group stands at 10%

• 51–60-year-olds represent 9%

• The below-20 age group makes up 1%

This data suggests a youthful tilt in mutual fund participation from B30 cities, which could have long-term implications for the industry’s growth.

Conclusion

The CAMS-CII report highlights the evolving investment patterns in B30 cities—marked by growing investor participation, rising SIP penetration, and increased AUM. While there remains room for improvement in terms of diversification and asset allocation, the overall trend points towards deeper mutual fund penetration in India’s emerging cities.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments in the securities market are subject to market risks, read all the related documents carefully before investing.