Increasingly many EMEs are beginning to impose capital controls and regulations, both of the traditional kind such as reserve requirements, URR and restrictions on investment in debt including minimum investment period but also more innovative ones such as prudential measures, administrative measures, tax measures and quantitative limits, particularly targeting the derivative positions held by banks.
Banks put their excess liquidity in central bank bills (SBIs) and in return BI has to pay interest on SBIs which means pumping in the liquidity in the banking sector. In the banking sector, one of the main challenges is to recover the intermediation function.