New Delhi [India], December 2 (ANI): The Reserve Bank of India (RBI) may need to inject nearly Rs 2 trillion in the remaining months of FY26 to maintain comfortable liquidity levels, according to a report by Emkay Global Financial Services. The report highlighted that liquidity in India’s banking system has tightened sharply since September, prompting the central bank to consider additional measures.
Emkay Global noted that the liquidity surplus, which remained above 1% of Net Demand and Time Liabilities (NDTL) through June, has now fallen below 0.5%. Analysts attribute the tightening to seasonal currency leakage, muted government spending, tax outflows, and substantial unsterilized foreign exchange interventions by the RBI. The central bank has reportedly conducted USD 22–25 billion in spot FX interventions since September, significantly draining durable liquidity.
The report also highlighted RBI’s short USD forward position, which increased from USD 53 billion in August to nearly USD 64 billion by October. Nearly USD 37 billion of buy-sell forward contracts are set to mature over the next three months, and if the RBI takes delivery of even 30% of these exposures, the domestic liquidity system could face a further drain of roughly Rs 1 trillion.
In addition, the surge in currency in circulation (CIC) has intensified system tightness, with FY26’s CIC leakage reaching Rs 1.47 trillion—higher than the previous year and aligned with a decade-long trend. Emkay projected that without significant Open Market Operations (OMO) injections, system liquidity could fall to 0.2–0.3% of NDTL by the end of FY26, well below the RBI’s informal comfort threshold of 1%.
Economists Madhavi Arora and Harshal Patel noted that additional liquidity injections would be “far more efficacious” than debating the timing of another rate cut. They added that higher liquidity would stabilize money market rates, ease transmission, and support the demand-supply balance in government securities, citing previous easing cycles that ended with surpluses above 2% of NDTL—significantly higher than current levels. (ANI)
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