RBI’s New Liquidity Norms May Unlock $35 Billion for Indian Banks
Image source: www.rbi.org.in
What happened?
The Reserve Bank of India (RBI) has introduced new rules to improve liquidity in the banking system. On April 22, 2025, the central bank reduced two key measures: the buffer rate on digitally linked deposits and the ‘run-off’ factor for certain wholesale deposits. These changes are part of a broader strategy to make it easier for banks to lend and manage their cash flow.
Who is affected?
The move directly impacts Indian banks, especially those facing tight funding situations. By reducing the amount of money banks are required to keep aside for safety, the RBI is allowing them to use more of their funds for business and lending activities. This is expected to benefit not only banks but also borrowers such as companies and individuals seeking loans.
When was it announced?
The new liquidity norms were announced on April 22, 2025. While exact dates for implementation may vary by category, the announcement has already triggered a positive response from markets and banking analysts.
Where will the impact be felt?
The impact will be nationwide, as all commercial banks operating in India must follow the RBI’s guidelines. Banks with larger amounts of digital and wholesale deposits are likely to benefit the most.
Why did RBI take this step?
The RBI made this move to ease the funding pressure on banks. Over the past few months, several banks have reported cash flow issues due to high reserve requirements and slower deposit growth. With rising demand for credit from businesses and consumers, the RBI is trying to ensure that banks have enough liquidity to meet those needs without compromising financial stability.
How much money will be unlocked?
According to estimates, the new rules could free up about $35 billion (or roughly ₹2.9 lakh crore) across the banking sector. This money can be used for lending, investments, and other financial services that boost the economy.
Conclusion
The RBI’s decision to relax liquidity norms is a major step toward supporting India’s financial sector. At a time when credit demand is rising and global financial conditions remain uncertain, this move gives banks more flexibility. It also sends a signal that the RBI is actively managing economic challenges through practical, growth-friendly policies.
Team Profile
- News Writer
- Saksham Mehta is a journalism graduate from Delhi University and a PGD student in Digital Media at IIMC New Delhi. Passionate about storytelling and news, he is a published author with Zee business. With a keen interest in analytical reporting, digital media, and financial journalism. Saksham is dedicated to making an impact in the evolving world of news and storytelling.
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