India’s money markets saw robust activity on May 16, 2025, with the Reserve Bank of India (RBI) steering liquidity and cash positions through a mix of operations, reflecting the dynamic interplay between banks, the government, and the central bank.
Key Highlights:
Banks’ Cash Balances Surge:
Scheduled commercial banks’ cash balances with the RBI stood at ₹9.35 trillion, indicating ample liquidity in the banking system as of May 16.
Government’s Surplus Auction:
The Indian government’s surplus cash balance with the RBI, available for auction, reached ₹5.283 trillion on the same day, underscoring strong fiscal reserves and a proactive approach to liquidity management.
Refinance Operations:
The RBI conducted refinance operations amounting to ₹87.36 billion, providing short-term liquidity support to banks and ensuring smooth settlement of transactions.
Marginal Standing Facility (MSF) Usage:
Indian banks tapped the RBI’s Marginal Standing Facility, a safety valve for emergency liquidity, borrowing funds to manage short-term mismatches and maintain stability in the overnight market.
Money Market Volumes and Rates:
The overnight segment saw a total volume of ₹6,00,556 crore, with weighted average rates ranging between 2.00% and 6.00%. Call money, triparty repo, and market repo segments remained active, reflecting healthy interbank lending and borrowing.
Liquidity Adjustment Facility (LAF):
The RBI’s fine-tuning operations included repo and reverse repo auctions, with net liquidity absorption indicating the central bank’s calibrated approach to managing surplus and deficit liquidity.
Standing Liquidity Facility (SLF):
Banks availed ₹8,584.67 crore from the RBI under the SLF, further highlighting the central bank’s role in supporting the system during periods of heightened liquidity demand.
These operations underscore the RBI’s vigilant oversight of India’s financial system, ensuring stability and confidence in the money markets.
Sources: The Week, Ujjivan Small Finance Bank, BYJU’S
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