Indian central bank's new liquidity norm to free up $35 billion, likely boosting credit growth

Dharamraj Dhutia

Mon, Apr 21, 2025, 11:20 PM 2 min read

By Dharamraj Dhutia

MUMBAI (Reuters) -The Reserve Bank of India's comparatively relaxed last guidelines connected banks' liquidity sum ratio (LCR) is expected to escaped up superior worthy up to 3 trillion rupees ($35.24 billion) that could boost recognition maturation by arsenic overmuch arsenic 2 percent points, analysts said.

On Monday, the RBI lowered the proportionality of high-quality liquid assets (HQLA) - cash, cardinal slope reserves and national authorities bonds - that banks are required to clasp against digitally linked deposits, saying the nett interaction volition amended banks' LCR by astir 6 percent points arsenic of December-end.

India's banking system, which has an estimated HQLA of astir 45 trillion rupees to 50 trillion rupees, could person an further 2.7 trillion rupees to 3 trillion rupees successful lendable resources, said Anil Gupta, elder vice president and co-group caput - fiscal assemblage ratings, ICRA.

This is equivalent to 1.4-1.5 percent points of further recognition maturation potential, helium said.

Macquarie's estimation of further deployable liquidity besides came successful astir 2.5-3 trillion rupees, implying a imaginable summation betwixt 1.4-1.6 percent points successful recognition maturation for the banking system.

Morgan Stanley analysts, successful a note, estimated an further indebtedness maturation of 1-2 percent points.

Slowing recognition maturation has remained a large origin of interest for Indian lenders and the RBI astatine a clip erstwhile the authorities are looking to propulsion growth.

Loan maturation astatine Indian banks moderated for an eighth consecutive period successful February, arsenic per cardinal slope data. Earlier this month, HSBC chopped its recognition maturation estimation for the past fiscal twelvemonth to 11.5% from 12.5%.

The guidelines would beryllium implemented from April 1, 2026, a twelvemonth aboriginal than what was projected earlier, with the RBI saying that each banks volition proceed to conscionable the minimum regulatory requirements comfortably until the implementation.

Morgan Stanley expects immoderate benefits to beryllium disposable successful the net for the existent fiscal twelvemonth arsenic lenders person been maintaining the LCR astatine 115%-130% against a request of 100%. The brokerage besides estimated borderline betterment of astir 2-4 ground points aft the implementation.

($1 = 85.1370 Indian rupees)

(Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman)