RBI’s Cash Carnival: Surplus Swells, Banks Borrow, and the Call Market Comes Alive!

On May 15, 2025, the Reserve Bank of India (RBI) reported significant activity in the money market, reflecting both robust liquidity management and evolving funding dynamics among Indian banks.

 

Key Highlights:

 

Banks' Cash Balances:

Indian banks held cash balances totaling ₹9.23 trillion with the RBI, indicating a strong liquidity position in the banking system.

 

Government Surplus:

The Indian government’s surplus cash balance with the RBI, available for auction, stood at ₹51.98 billion, underscoring prudent fiscal management and the ability to inject liquidity if required.

 

Refinance Operations:

The RBI provided ₹8.585 trillion in refinance on May 15, supporting banks’ short-term funding needs and ensuring smooth money market operations.

 

Marginal Standing Facility Usage:

Indian banks borrowed ₹388 billion via the Marginal Standing Facility (MSF), reflecting a moderate demand for overnight liquidity and the central bank’s readiness to meet short-term funding requirements.

 

Call Money Market Revival:

The RBI is actively encouraging banks to revive the interbank call money market, a vital channel for transmitting monetary policy. Average daily volumes in the call market have reached their highest in over five years, with daily averages at ₹16,490 crore this month. This resurgence is crucial as the call rate remains the operational target for monetary policy, even as non-bank entities increasingly use secured funding avenues like repos.

 

Policy Context:

The RBI’s push comes amid a broader shift in funding patterns post-pandemic, with mutual funds and insurers favoring secured markets. The central bank’s efforts aim to maintain the relevance of the call money market for effective policy transmission and financial stability.

 

These developments highlight the RBI’s proactive stance in managing liquidity, supporting market confidence, and ensuring the seamless functioning of India’s financial system.

 

Sources: Business Standard, The Hindu Business Line, The Week