RBI’s Strategic Liquidity Boost: A Game-Changer for India's Banking Sector
Fitch Ratings applauded the Reserve Bank of India's substantial liquidity infusions and CRR cuts in 2025, citing improved funding conditions and effective rate cut transmissions. With a strategic focus on boosting loan growth, RBI's measures have yielded surplus liquidity and decreased deposit costs, enhancing financial stability.
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- India
Fitch Ratings has praised the Reserve Bank of India (RBI) for its significant liquidity infusions into the banking system since early 2025. The global rating agency noted that the central bank's strategy, including a 100 basis point rate cut, is set to enhance financial stability in the coming year.
The RBI injected approximately Rs 5.6 lakh crore in durable funding through government securities purchases in 2025, leading to surplus liquidity since March. In conjunction with this, the RBI also implemented a 100 basis point cut in the cash-reserve ratio (CRR), which will be released in phases, adding another Rs 2.7 lakh crore in liquidity.
Fitch highlighted that these measures reflect a marked shift in RBI's liquidity stance and are designed to spur loan growth without escalating funding costs. The ensuing surplus liquidity is expected to drive down fresh deposit costs, although a slight contraction in margins is anticipated in FY26, with relief foreseen in FY27.
(With inputs from agencies.)
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