Do banks consider locked-in assets for line of credit increase?

You shouldn't really use registered funds as security. Technically you're actually able to. I forget where I read this but I recall taking it seriously because it was from a reputable source. Apparently, you actually can use registered funds as security, however the moment you do so it is considered a withdrawal from the registered funds by the CRA. You are therefore required to pay taxes on that withdrawal. However, the moment the security is released through repayment of the debt, you're able to put the money back into your RRSP and recover the taxes paid.

I'll try and find the source for this. For the moment you'll have to take my word for this. Sorry.

Anyhow, in your case, it's LOCKED IN - no withdrawals until a certain age/disability etc., is reached. I don't think you can use it as security. So, as far as the bank is concerned, the money doesn't even exist as money that could otherwise be applied to offset a debt in your LOC.

Therefore, holding it against you for approval of limit increases on your LOC, sounds wrong, and I would consider it a dirty trick and promplty end my relationship with that bank.