RBI Policy
CRR cut, govt spending to aid liquidity in coming days
This story was originally published at 13:50 IST on 1 October 2025
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--RBI Malhotra: CRR cut, govt spending to aid liquidity in coming days
--RBI Malhotra: Drawing down of govt cash balance, CRR cut will aid liquidity
--RBI Malhotra: Will anchor short-term rates through 2-way liquidity ops
--RBI Malhotra: Will actively manage liquidity through two-way ops
--RBI Malhotra: Money mkt rates stable amid comfortable liquidity condition
MUMBAI – The drawdown of government cash balances and the remaining 75-basis-point cut in the cash reserve ratio during Oct-Nov will aid the banking system liquidity in the near term, said Reserve Bank of India Governor Sanjay Malhotra Wednesday while outlining the Monetary Policy Committee's decision. Money market rates have remained relatively stable amid comfortable liquidity conditions, he said.
The RBI Tuesday net absorbed INR 780.21 billion from the banking system, which is a proxy for systemic liquidity surplus, higher than INR 550.06 billion on Monday. System liquidity, as measured by the net position under the Liquidity Adjustment Facility, stood at an average daily surplus of INR 2.1 trillion since the last Monetary Policy Committee meeting in August, the governor said.
The weighted average lending rate of scheduled commercial banks moderated by 58 bps for fresh rupee loans during February to August, when the RBI's rate setting panel slashed the repo rate by 100 bps. Moreover, the weighted average lending rate also moderated 71 bps due to the interest rate effect, the governor said.
"On the deposit side, the weighted average domestic term deposit rate on fresh deposits declined by 106 bps, while that on outstanding deposits softened by 22 bps over the same period. Transmission has been broad-based across sectors," Malhotra said. "Through our two-way operations, we will actively manage liquidity to anchor short-term rates."
The RBI on Tuesday released a revised liquidity management framework, shifting to seven-day variable rate repo and reverse repo operations as its primary tool to manage transient liquidity. It discontinued the 14-day operations, which served as its main policy tool in the old framework adopted in February 2020. End
Reported by Srijita Bose
Edited by Akul Nishant Akhoury
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