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RBI Keeps Liquidity Tools Flexible as Surplus Expected to Ease by March
M
Moneycontrol•07-10-2026, 14:43
RBI Keeps Liquidity Tools Flexible as Surplus Expected to Ease by March
- •RBI Governor Sanjay Malhotra stated that temporary liquidity tools like VRRR auctions and dollar-rupee buy-sell swaps will continue to be used to manage surplus liquidity.
- •The central bank expects natural factors such as currency leakage and foreign exchange operations to gradually absorb a substantial part of the surplus within the financial year.
- •Malhotra noted that the RBI has not entirely ruled out durable measures like a cash reserve ratio hike if current surplus conditions persist unexpectedly.
- •System liquidity surged during August and September due to capital inflows, though measures like VRRR auctions and advance tax outflows helped moderate the excess.
Key Questions Answered
The Reserve Bank of India continues to use temporary liquidity absorption tools such as variable rate reverse repo (VRRR) auctions, dollar-rupee buy-sell swaps, and ongoing sterilisation.
System liquidity increased substantially during August and September, driven largely by capital inflows following special measures introduced by the RBI, including the facility to attract foreign currency non-resident (FCNR-B) deposits.
No, RBI Governor Sanjay Malhotra stated that the central bank has not ruled out a cash reserve ratio (CRR) increase or other measures if required, noting that it is still an evolving and uncertain world.
