The report states that Indian banks are requesting the relaxation of liquidity rules to support loan growth.

According to informed sources, as loan demand is growing faster than deposit growth, several banks in India have requested the Reserve Bank of India to relax multiple liquidity regulation rules in order to release more funds to support business expansion. The banks are seeking approval to use some of the funds that are required to be deposited at the Reserve Bank of India to deal with short-term financial pressures. Over the past two weeks, the Reserve Bank of India has held meetings with several banks. These discussions highlight the challenges faced by the Indian banking industry in sustaining the continuous growth of credit demand. As households are using their savings to buy stocks, traditional sources of funding for banks are decreasing. The sources also stated that banks have requested the Reserve Bank of India to consider implementing liquidity regulations that were originally scheduled to take effect on April 1st earlier, allowing banks to hold fewer government bonds, which can also release more funds for lending. The banks also hope to lower the minimum maturity period for infrastructure bonds, which is currently seven years.