RBI frees up about Rs 2 trillion worth of liquidity for the banking system

The RBI said banks can now consider 2 percentage points of their statutory liquidity ratio as part of the liquidity coverage ratio

The Reserve Bank of India (RBI) on Thursday freed up about Rs 2 trillion worth of liquidity for the banking system by tweaking how the solvency ratio is calculated, effective October 1. The move comes against the backdrop of tightening liquidity in the banking system and rates shooting up in the money market.

However, the freed-up money will unlikely prompt banks to buy non-banking financial companies (NBFC) papers. Sources told Business Standard that banks told the central bank that they were not interested in buying NBFC debt papers for fear of rising mark-to-market losses.

“The RBI is doing the right