RBI Money Market Actions: Liquidity Injection, Repo Rate Reduction, and Signals of Surplus

The Reserve Bank of India (RBI) went on with its liquidity injection push, conducting the last tranche of its ₹1.25 lakh crore open market operation (OMO) bond buying on May 19. For this auction, RBI received bids totaling ₹19,203 crore—short of the notified ₹25,000 crore—though it had received more than ₹50,000 crore in bids, showing the central bank's confidence with existing liquidity and selective bond-buying policy.

 

As of May 19, combined cash holdings of Indian banks were at ₹9.63 trillion, indicating healthy liquidity in the system. Surplus cash balance of the government with RBI for auctioning purpose was at ₹51.7 billion, further buttressing market stability.

 

RBI also gave refinancing worth ₹87.36 billion on May 19, while banks borrowed ₹4.56 billion under the Marginal Standing Facility, indicating continued use of central bank facilities to cater to short-term funding requirements.

 

As a parallel action to spur credit and boost economic growth, the RBI cut the repo rate by 25 basis points to 6.00%, indicating an accommodative policy and relief for borrowers in the form of possible cheaper EMIs.

 

Money market operations saw healthy participation, with overnight call money volumes and triparty repo activity at multi-year highs. The RBI’s push for active interbank trading aims to keep monetary policy transmission effective and maintain orderly market conditions.

 

These coordinated actions underscore the RBI’s commitment to ensuring ample liquidity, supporting growth, and maintaining financial market stability as FY26 unfolds.

 

Sources: Economic Times, NDTV Profit, The Week, Business Standard