Liquidity surplus in banking system Rs 4.9 lk cr: CARE Ratings

CARE Ratings said that while the TLTRO is a positive thing for corporate bond markets, it remains to be seen whether banks would decide to invest in the lower-rated investment category bonds.

Moneycontrol News

April 17, 2020 / 15:45 IST

The reduction of reverse repo rate by the Reserve Bank of India (RBI) is a move aimed at nudging banks to deploy their surplus liquidity across various segments in the economy, according to CARE Ratings. Banks can do so via the extension of credit to various sectors and making investments, the rating agency said.

RBI Governor Shaktikanta Das announced a series of measures on April 17 to infuse monetary stimulus and liquidity in the already strained economy. He declared a 25-basis-point reduction in the reverse repo rate making it 3.75 percent.

The RBI governor also announced a fresh round of Rs 50,000 crore worth targeted long-term repo operations (TLTRO) to be conducted in tranches and reduced the liquidity coverage ratio (LCR) requirement for scheduled commercial banks from 100 percent to 80 percent with immediate effect.

CARE Ratings pegs the current liquidity surplus in the Indian banking system at around Rs 4.9 lakh crore.

"The latest measures by the RBI are a recognition of the tightening financial conditions of small and mid-sized corporates, NBFCs and MFIs(microfinance institutions) and are largely aimed at improving availability and access to funds to these segments while the lockdown is in place. This would to an extent ease the financial pressures being
faced by NBFCs," CARE Ratings said in a statement.

COVID-19 Vaccine

Frequently Asked Questions

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