Indian banking institutions have formally approached the Reserve Bank of India (RBI) with requests to relax existing liquidity regulations, seeking to unlock additional funds for growth-oriented initiatives. The move represents a coordinated effort by lenders to optimize their capital deployment strategies.

Liquidity Rule Relaxation Request

The banking sector has specifically sought permission to free up cash reserves that are currently required to be parked with the RBI under short-term financial stress requirements. These mandatory reserves form part of the regulatory framework designed to ensure banking system stability during periods of financial uncertainty.

Capital Optimization Strategy

The requested relaxation would enable banks to redirect funds from regulatory parking requirements toward active lending and growth activities. This approach reflects the banking sector's focus on expanding credit availability while maintaining operational efficiency.

Regulatory Framework Impact

The banks' request addresses the current regulatory structure that mandates specific cash reserves be maintained with the central bank. These requirements are designed to provide financial institutions with immediate access to funds during short-term stress scenarios, ensuring system-wide stability and liquidity management.

Bank of India has completed the full redemption of its 9.04% Additional Tier I Bonds Series VI, exercising its call option to repay the entire Rs 750 crores principal amount along with broken period interest to bondholders on January 28, 2026.

Bond Redemption Details

The bank exercised its call option under Regulation 57 of SEBI (LODR) Regulations, 2015, for the complete redemption of the bonds carrying ISIN INE084A08136. The redemption covered all 7,500 bonds in the series, leaving no outstanding amount.

Interest Payment Structure

The bank made the final interest payment as part of the redemption process, covering the broken period from the last interest payment date. The last regular interest payment was made on April 2, 2025, and the broken period interest amounted to Rs 56,09,75,427.

Regulatory Compliance

The redemption was executed in accordance with SEBI regulations, with Bank of India providing proper notification to both NSE and BSE. The bank had previously communicated its intention to exercise the call option through a letter dated December 22, 2025, ensuring transparency and regulatory compliance throughout the process.

Impact on Capital Structure

With the complete redemption of the Additional Tier I Bonds Series VI, Bank of India has successfully closed this particular debt instrument from its capital structure. The exercise of the call option demonstrates the bank's active capital management approach and its ability to optimize its funding costs when market conditions are favorable.