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RBI Money Market Steps: Liquidity Soars, Banks' Cash Holdings Reach ₹9.56 Trillion

Updated: May 08, 2025 09:38

The Reserve Bank of India (RBI) reflected strong money market activity on May 7, 2025, as it maintained its effort to ensure enough liquidity and even monetary transmission in the banking system. This is a brief overview of the recent happenings and their implications for the Indian financial market:
 
Highlights:
  • Banks' Cash Balances Rise: Indian banks maintained a large ₹9.56 trillion of cash balances with the RBI, indicating a robust liquidity position in the system.
  • Government Excess Cash Auction: The surplus cash balance of the central government with the RBI, ready to be auctioned, was at ₹51.92 billion, showing sound fiscal management and scope for additional liquidity operations.
  • Active Refinance Operations: The RBI made available ₹87.09 billion of refinance on May 7, augmenting banks' short-term funding requirements and ensuring that credit flow is uninterrupted.
  • Marginal Standing Facility (MSF) Usage: Banks borrowed ₹4.93 billion under the MSF window, a facility meant to correct surprise mismatches in liquidity and serve as a safety valve for the system.
  • OMO Auctions Attract Strong Demand: The RBI’s recent open market operation (OMO) purchase saw bids worth over ₹1.32 trillion-more than double the notified amount-underscoring banks’ appetite for liquidity and the RBI’s proactive stance. The central bank has infused ₹3.24 trillion into the system since January, swinging liquidity from deficit to surplus territory.
  • Outlook: With the RBI’s ongoing liquidity management, including further OMO auctions scheduled, banking system liquidity is expected to remain comfortable, though it may fluctuate with government spending patterns.
India’s money market remains dynamic, with the RBI’s calibrated interventions ensuring stability and supporting economic growth.
 
Sources: Financial Express, The Week, Moneycontrol

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