Foreign Banks and brokerages expect the Reserve Bank of India (RBI) to come up with more liquidity support measures to tackle the banking system’s liquidity deficit, which was estimated at ₹3 lakh crore before the recent set of steps taken by central bank to ease tight liquidity conditions.

In order to ease liquidity conditions, especially ahead of fiscal year end tightness in March, the RBI had two days back announced measures including fresh Open Market Operations (OMO), 56 days repo plus $5 billion USD/ INR swaps  that in aggregate is expected to infuse ₹1.5 lakh crore liquidity in banking system.

“We expect that RBI may also ease proposed tightening of Liquidity Coverage Ratio (LCR) norms that in current form can force banks to reallocate ₹7 lakh crore from loans to G-secs or liquid assets. We feel RBI is going to ease regulations and possibly rates/liquidity in 2025 and that will have positive rub off on banks and NBFCs,” said a Jeffries research note, post the latest RBI liquidity enhancing measures.

Aastha Gudwani, Chief India Economist, Barclays Global Research, said these recent RBI measures are welcome steps and more are in the offing.

There is now widespread expectation that RBI may in the wake of high liquidity deficit drop an earlier plan to tighten the LCR norms and not proceed with the earlier announced draft version that were put out for stakeholder comments. “Any potential easing of draft LCR regulations will come as more relief for the sector, in our view,” said a Nomura Global Markets Research note. 

Published on January 29, 2025