Liquidity Crisis

The Reserve Bank of India (RBI) on Friday pulled out Rs 2,00,031 crore transient liquidity from the banking system through a seven-day variable rate reverse repo (VRRR) auction. The central bank had received higher bids worth Rs 2,28,098 crore than the notified amount of Rs 2 lakh crore in the auction. The RBI accepted the bid at a 5.24 per cent cut-off rate and 5.23 per cent weighted average rate. Currently, the liquidity in the banking system is estimated to be in surplus of around Rs 4.09 lakh crore. Before this, the central bank had conducted a seven-day VRRR auction on April 10 and pulled out Rs 2,00,041 crore of transient liquidity from the banking system. These funds were reversed today into the banking system. "Going ahead, we will continue to be proactive and pre-emptive in liquidity management and ensure sufficient liquidity in the banking system to meet the productive requirements of the economy," RBI Governor Sanjay Malhotra said during the April monetary policy.

Margin pressure for Indian banks could increase, as the Reserve Bank of India's (RBI) flexibility to inject local-currency liquidity into the banking system has narrowed amid efforts to contain rupee volatility, a report said on Thursday. However, banks' direct foreign-currency risks remain limited, Fitch Ratings said in a report. "Sector margins could decline by 20-30 bps below our current 3.1 per cent forecast for the financial year ending March 31, 2027 (FY27) if higher funding costs linked to Middle East tensions persist. This could reduce operating profit/risk-weighted assets (RWAs) - our core earnings metric - by around 30-40bps, from our 2.5 per cent forecast for FY27," it said. The base case assumed deposit costs would decline in FY27 as accommodative liquidity would enable further transmission of the RBI's 125 bps of policy rate cuts since December 2024; only 44 bps have been passed through to deposit rates as of January 2026, due to intensified competition for deposits wit

The weighted average call rate (WACR) has stayed around 5.07 per cent , since the start of February, even while the policy repo rate remains at 5.25 per cent

Deposit tightness has pushed certificate of deposit outstanding to a record ₹5.75 trillion, with marquee banks raising one-year funds at over 7%

RBI's recent swap of $10 billion has calmed market participants' frayed nerves

The RBI has doubled the quantum of government securities it aims to purchase Rs to 400 billion rupees ($4.61 billion) on a review of current and evolving liquidity conditions

Sources privy to the development said that the company is actively streamlining its operations to address various challenges

Outstanding Certificate of Deposit issuances highest since 2012

Businesses in Bangladesh are facing a liquidity crunch as the central bank has capped the withdrawal of cash from banks at Tk 2 lakh amidst uncertainty in the country following the fall of the Sheikh Hasin-led government, a media report said on Monday. The Bangladesh Bank set a cash withdrawal limit of Tk 2 lakh (Rs 1.42 lakh approximately) per account on Saturday, increasing it from the Tk 1 lakh announced earlier. The central bank decided this due to security concerns as police are yet to return to work fully, following the clashes between police and students during the widespread protests against Hasina's Awami League-led government over a controversial quota system in jobs. Interim Finance and Planning Adviser Salehuddin Ahmed on Sunday also said that the limit on cash withdrawals was required given the current situation. Businesses, especially those mainly dealing with cash transactions, said they would be in a tough situation if the cash crisis lingers and restrictions remain

Additional 5% 'run-off' factor imposed on retail deposits in view of proliferation of digital banking

Securities that are eligible for the statutory liquidity ratio like central and state government bonds are reckoned as HQLA for the purpose of calculating LCR. Banks have to maintain 100 per cent LCR

FMPs don't face the issue of liquidity management but have higher costs

The liquidity deficit in the system widened to Rs 1.96 trillion on Sunday

Market participants said that if the government refrains from spending, the central bank might resort to other measures to infuse liquidity apart from variable rate repo auctions

The liquidity drought may be deliberate. Unlike Beijing, New Delhi has every reason to be sanguine about growth

Bids totaling 2.7 times the notified amount were received at VRR auction on December 15

CD issuances in December highest in this financial year

VRR auctions, govt spending likely to help ease situation

The deficit was the highest since Dec 26, 2018, when it had hit Rs 1.86 trillion, according to economists

According to data from the Prime database, companies and banks raised Rs 23,797 crore as of October 24, compared to Rs 72,941 crore in September