Banks across India will observe extended closures this week, remaining shut for five days between January 12-17 according to the Reserve Bank of India's official holiday calendar. The closures will affect different states on various dates due to regional festivals and cultural celebrations.

State-Wise Bank Holiday Schedule

The Bank of India and other banking institutions will observe the following state-specific closures:

Upcoming January Bank Holidays

Beyond this week's closures, banks will observe additional holidays throughout January:

• January 18 & 25: Regular Sunday closures
• January 23: Birth anniversary of Netaji Subhas Chandra Bose, Saraswati Puja, Vir Surendrasai Jayanti, and Basanta Panchami in West Bengal, Odisha, and Tripura
• January 24: Fourth Saturday closure
• January 26: Republic Day (National holiday)

Banking Operations and Customer Services

Despite branch closures, customers can continue accessing essential banking services through digital platforms. ATMs, UPI payments, and online banking services will remain operational throughout the holiday period without interruption.

Regulatory Framework

The Reserve Bank of India publishes the official calendar of bank holidays in accordance with the Negotiable Instruments Act, 1881. Banks maintain regular operations on the first, third, and fifth Saturdays of each month while remaining closed on second and fourth Saturdays, along with all Sundays.

Customer Advisory

Customers are advised to confirm branch timings before visiting, as operating hours may vary across different locations. The RBI's official holiday calendar provides comprehensive guidance on service availability, and customers can contact their local branch directly for specific queries regarding holiday schedules and service accessibility.

The Reserve Bank of India is expected to inject additional liquidity into the financial system during February and March to anchor rising short-term borrowing costs, as market participants anticipate continued pressure on commercial paper and certificate of deposit rates. Despite the central bank's injection of ₹3.00 lakh crore in December and January, short-term rates have continued to climb amid persistent liquidity constraints.

Sharp Rise in Short-Term Rates

Commercial paper and certificate of deposit rates have experienced significant increases over recent months, reflecting the tight liquidity conditions in the banking system. The data reveals substantial rate movements across key short-term instruments.

"Short-term rates are more affected by the liquidity situation in the system. CD rates have gone up in the recent past and are trading with an upward bias as liquidity is tight. I think the RBI will bring in more liquidity support in February and March," said Alok Singh, head of treasury at CSB Bank of India .

System Liquidity Under Pressure

System liquidity has remained constrained since mid-December due to multiple factors impacting money market conditions. The liquidity situation shifted from surplus to deficit in the second half of December, with current conditions showing only a tight surplus of ₹43,421.00 crore on average in January.

Key factors contributing to liquidity pressure include:

• Subdued government spending patterns
• Sustained foreign exchange market intervention by RBI
• Increased credit demand from banking sector
• Competition for deposits amid strong credit growth

"Demand for CDs and CPs has increased because liquidity was tight in the second half of December, and it is still tight even now. In addition, credit growth is good, while there is a race for deposits," explained Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank.

Credit-Deposit Dynamics

The banking sector's credit and deposit growth patterns have contributed to the current liquidity scenario, with credit expansion outpacing deposit mobilization. This divergence has pushed the credit-deposit ratio to unprecedented levels.

Market Outlook and Policy Response

Market participants anticipate that the Reserve Bank of India will need to implement additional liquidity infusion measures, including open market operations, over the next two to three months to prevent deficit conditions from persisting. The pressure on certificate of deposit rates has intensified over the past fortnight, with implications for the broader yield curve.

"If the demand for CDs keeps increasing, then the shorter end of the yield curve (one- to five-year yields) is going to be affected. The pressure on CDs has come up in the last fortnight or so, and with low deposits and tight liquidity, this race for deposits will intensify," noted a senior bond trader with a primary dealership.

"More liquidity infusion measures including open market operations will be required in the next two-three months, or deficit conditions will persist," Pawar added, highlighting the ongoing challenges facing the monetary policy framework in managing system liquidity effectively.