The RBI’s move to inject Rs 1.9 lakh crore has come as a big positive for banks, which is reflected in the rise in the stock prices of both private and public sector banks, as well as Non-Banking Financial Companies (NBFCs) on Thursday.

The Nifty PSU Bank index rose 1.46 per cent, or 86.3 points to hit an intraday high of 5,976.75, while the Nifty Bank index increased 0.72 per cent, adding 349.15 points to hit an intraday high of 48,839.10. Similarly, the Nifty Private Bank index recorded a gain of up to 0.67 per cent in morning trade.

As part of the measures to infuse more liquidity in the banking system, the RBI has announced that it will conduct open market operation (OMO) purchases of government securities worth Rs 1 lakh crore in two tranches of Rs 50,000 crore each. The first auction will be held on March 12 and the second by March 18.

Besides, the central bank has also decided to hold a dollar-rupee buy/sell swap auction of $10 billion for 36 months to be held on March 24.

The measures are expected to infuse additional liquidity of Rs 1.9 lakh crore. The move comes ahead of an anticipation of tight liquidity conditions by the end of the current financial year (FY25) amid tax outflows and banks rushing to meet targets.

The RBI said it "will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions," it said in a press release.

These measures will not only address frictional liquidity tightness in March but also the issue of durable liquidity which has tightened of late, according to Teresa John, economist at Nirmal Bang Institutional Equities.

"While liquidity will likely be neutral by end March, it may move to surplus as we enter into FY26 unless we continue to see dollar sales by the RBI," John said.

Transmission is also likely to improve significantly, she said, adding that corporate bond spreads had tightened despite rate cuts.

Samiran Chakraborty, chief economist at Citi, estimates that durable liquidity would now move towards Rs 1.2 lakh crore surplus by end-March. Including outstanding VRRs, liquidity surplus could be about Rs 3 lakh crore, he estimated.

The Monetary Policy Committee had cut rates by 25 basis points at its meeting in February, preceding which, the central bank had announced measures to infuse liquidity.

According to economists, liquidity conditions have been tight since mid-December largely due to tax outflows, dollar sales by the RBI in the foreign exchange market to stabilise the rupee.

The RBI had earlier injected another Rs 1.7 lakh crore to enhance liquidity in the banking system in February

In a big relief for banks, RBI Governor Sanjay Malhotra had also announced the postponement of the proposed Liquidity Coverage Ratio (LCR) as well as project financing norms by a year. These will not to be implemented before March 31, 2026.

He said that the step has been taken as the earlier deadline March 2025 announced by his predecessor, did not give sufficient time for the implementation of these guidelines.

The step was taken after the RBI held close consultations with banks, who were staunchly opposed to the implementation of the new norms as they would lead to a liquidity crunch.

Malhotra has made it clear that the RBI does not want to cause disruption in the financial system and will ensure a smooth transition, he added.

Both public sector and private sector banks had opposed the implementation of these norms, announced by former RBI Governor Shaktikanta Das, as they feared that it would cause a liquidity crisis in the financial system.

The heads of banks had raised the issue with Malhotra, shortly after he took over as RBI Governor with Das’ tenure coming to an end.

These norms were earlier scheduled to come into effect on April 1, 2025.

According to treasury officials of banks, implementing the LCR norms would in effect mean over Rs 4 lakh crore would have to be diverted from banks to buy government bonds instead of extending credit to corporates and individuals to boost demand in the economy and spur growth.