Liquidity is critical for the smooth functioning of the banking industry. The study aims to investigate the impact of deposits, profitability, bank size, net interest margin, capital, non-performing assets, gross domestic product, interest rate, statutory liquid ratio, and cash reserve ratio on bank liquidity in India. The research methodology includes balanced panel data of 49 banks for analysis from 2008 onwards. A generalized method of moment technique has been employed to inspect the specified purpose. The results exhibit that non-performing assets, profitability, and deposits have positively influenced bank liquidity. In contrast, bank size, capital, net-interest margin, gross domestic product, interest rate, and cash reserve ratio negatively impact bank liquidity. The statutory liquid ratio has an insignificant effect on the liquidity of banks. The results would be helpful to bank managers, policymakers, and academics to make appropriate policies to preserve bank liquidity without suffering any loss or undefined costs.

Highlights

• Banks maintain higher liquidity to manage cash flow when NPAs increase.
• Profitable banks hold more liquidity to cover potential losses from risky investments.
• Smaller banks maintain higher liquidity due to limited access to alternate funding sources.