The fallout of the Global Financial Crisis demonstrated the importance of bank liquidity creation (LC) for the economies. This study attempts to analyze the implications of LC for promoting the financial stability of banks. To address this question, a dynamic panel estimation has been employed for 1046 firm-year observations of commercial banks operating in one of the fastest-growing emerging markets, India, covering the period 2007 to 2019. The results suggest that LC enhances the financial stability of banks. However, this impact varies according to bank size. Further, private sector banks are found to be more stable than public sector banks. Thus, the study emphasizes the need for LC. It also suggests that ‘one-size-fits-all’ liquidity regulations are not optimal for the stability of banks.

全球金融危机的后果表明，建立银行流动性（LC）对经济体至关重要。本研究试图分析信用证对促进银行金融稳定性的影响。为了解决这个问题，在2007年至2019年期间，采用动态面板估计法对在增长最快的新兴市场之一印度的1046家公司的商业银行进行了年度实测。结果表明，LC增强了金融稳定性。银行。但是，这种影响因银行规模而异。此外，发现私营部门的银行比公共部门的银行更稳定。因此，该研究强调了LC的必要性。这也表明，“一刀切”的流动性法规对于银行的稳定性并不是最佳的。