Liquidity on Edge: RBI’s July 9 Data Reveals Banks Tapping Emergency Funds

Image Source: The Economic Times

The Reserve Bank of India (RBI) released its money market operations data for July 9, 2025, revealing a cautious liquidity environment and heightened shortterm borrowing activity among banks.

Key highlights from the RBI’s disclosures:

Banks’ cash balances with the RBI stood at ₹9.21 trillion, slightly below the fortnightly average reserve requirement of ₹9.52 trillion
Government surplus cash balance with the RBI was nil, indicating no excess funds available for auction on the day
Refinance operations totaled ₹55.61 billion, reflecting demand for shortterm liquidity support
Marginal Standing Facility (MSF) usage surged, with banks borrowing ₹10.81 billion—signaling stress in overnight funding markets

Market implications:

The elevated MSF borrowing suggests tight liquidity conditions, possibly driven by tax outflows or muted deposit growth
Absence of government surplus cash may limit RBI’s flexibility in conducting auctions to inject liquidity
Refinance activity indicates banks are actively managing shortterm mismatches amid cautious credit deployment

The RBI’s liquidity management tools—MSF, Standing Deposit Facility (SDF), and repo operations—remain critical in balancing systemic liquidity while supporting growth and inflation targets.

Sources: Reserve Bank of India, Reuters, The Week, RBI Press Releases