Uneven liquidity profile of large and small banks showed in September

With the quarter and financial half-year ending, banking system liquidity was strained due to advance tax outflow and goods and service-related payments

With the Reserve Bank of India (RBI) offering to buy bonds worth Rs 360 billion from the market, and infusing additional liquidity worth Rs 2 trillion of by relaxing the liquidity coverage ratio (LCR), the asymmetric liquidity profile of Indian banks might get resolved.

 In the last week of September, it was apparent that one group of banks was liquidity-starved and borrowed heavily from the RBI, whereas the other (large banks) had excess liquidity, which they parked with the regulator.

Experts say, liquidity in the system is highly skewed in favour of large banks, particularly the public sector ones that