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Informist, Wednesday, Aug. 5, 2026

 

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--RBI Malhotra: Liquidity will obviously help, may be surplus only short-term 
--RBI Malhotra: Liquidity is not extraordinarily high 
--RBI Malhotra: Liquidity surplus may peak near Oct 
--RBI Malhotra: Liquidity surplus is not substantial, is only short-term 
--RBI Malhotra: Manage liquidity so weighted avg call aligns with policy rate 
 

 

MUMBAI – Reserve Bank of India Governor Sanjay Malhotra said the current liquidity surplus in the banking system is not "extraordinarily" high and is expected to persist only in the short-term. "The liquidity may be in surplus only for the very short term," Malhotra told reporters at the post-policy press conference. "It (liquidity) may peak in Q2 around September or so. And going forward, it should get absorbed because of normal needs of the economy to increase in currency circulation." 

 

Banking system liquidity has risen since Friday to the highest level since Apr. 20, driven mainly by Foreign Currency Non-Resident (Bank) deposit inflows. The net liquidity absorbed by the RBI – a proxy for liquidity surplus – was at INR 3.34 trillion Tuesday, sharply up from INR 2.44 trillion Monday. Outstanding FCNR(B) deposits rose by $28 billion between Jun. 5 and Thursday to $60.55 billion, according to a written reply by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha. 

 

Going forward, Malhotra said, FCNR(B) deposit inflows will return to a "normal" pace unless there is an unexpected surge in deposits. "But as I mentioned to you, the liquidity that it will inject is there for a short while," the governor said.  

 

He reiterated that the RBI will continue to manage liquidity so that its operating target, the weighted average call rate, aligns with the 5.25% policy repo rate. "So, the kind of liquidity that we will give out will depend on what is the policy rate. And what the policy rate will be determined by the growth and inflation dynamics where demand also comes in," Malhotra said.    

 

The Reserve Bank of India's Monetary Policy Committee unanimously left the policy repo rate unchanged at 5.25% on Wednesday. The rate-setting panel's decision was on expected lines.  End

 

Reported by J. Navya Sruthi

Edited by Saji George Titus

 

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