Surplus Story: Banks and Government Sit Pretty as RBI Preps Policy Shift

Image Source: The Indian Express

India’s banking sector remains awash with liquidity as the Reserve Bank of India (RBI) gears up for its June monetary policy announcement. Key financial indicators from June 5, 2025, highlight a robust cash position, ongoing government surplus, and active central bank operations, even as the rupee faces marginal depreciation against the US dollar.

Key Highlights:

Banks’ aggregate cash balances stood at ₹9.40 trillion on June 5, reflecting continued surplus liquidity in the system.
The Indian government maintained a surplus cash balance of ₹41.38 billion with the RBI, available for auction, underscoring prudent fiscal management and strong revenue inflows.
The RBI provided ₹83.22 billion in refinance on June 5, supporting banks’ short-term funding needs and ensuring smooth liquidity flow.
Indian banks borrowed ₹5.80 billion via the Marginal Standing Facility (MSF), indicating limited overnight funding requirements and overall comfort in liquidity conditions.
The Indian rupee opened down 0.1% at 85.87 per US dollar, compared to the previous close of 85.79, reflecting mild currency pressure amid global market volatility.

These developments come as the RBI’s Monetary Policy Committee (MPC) is widely expected to announce another 25 basis point repo rate cut, driven by subdued inflation and robust GDP growth. Ample liquidity, combined with a supportive policy stance, is poised to further stimulate credit growth and economic activity.

Analysts highlight that the current liquidity surplus, bolstered by a record RBI dividend to the government, provides the central bank ample room to maneuver on rates while maintaining financial stability.

Source: Reserve Bank of India (RBI)