Indian Banks Seek Regulatory Easing Amid Rising Loan Demand

Indian banks are requesting the Reserve Bank of India (RBI) to relax certain liquidity regulations to free up more funds for business expansion, according to informed sources. The demand for loans is growing faster than deposits, prompting banks to seek permission to utilize some of the funds that are required to be held with the RBI for short-term financial stress management. According to Jin10, the RBI has held discussions with several banks over the past two weeks, highlighting the challenges faced by the Indian banking sector in sustaining credit demand growth. As households increasingly invest their savings in stocks, traditional funding sources for banks are diminishing. Sources also revealed that banks are urging the RBI to consider implementing liquidity regulations ahead of the scheduled April 1 date, which would allow banks to hold fewer government bonds and thus release more funds for lending. Additionally, banks are advocating for a reduction in the minimum term for infrastructure bonds, currently set at seven years.