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What’s Behind the RBI’s ₹85.74 Billion Refinance and Bank Borrowing Spike?

Updated: July 23, 2025 09:28

Image Source : The Economic Times
1. Currency Movement Reflects Market Caution
 
The Indian rupee opened marginally lower on July 22, slipping 0.05 percent to 86.41 against the US  dollar.

- Previous close stood at 86.3675

- Traders cited global dollar strength and cautious domestic sentiment
 
2. RBI’s Liquidity Operations Signal Tightening
 
The Reserve Bank of India’s daily money market operations revealed a net liquidity absorption trend.
 
- Banks borrowed Rs 132.73 billion via the Marginal Standing Facility (MSF)
 
- RBI refinanced Rs 85.74 billion, indicating short-term liquidity support
 
- Standing Deposit Facility (SDF) and MSF rates remained steady at 5.25 and 5.75 percent respectively
 
3. Cash Balances and Government Position
 
- Scheduled commercial banks held Rs 9.45 trillion in cash balances with RBI
 
- Government of India’s surplus cash balance with RBI was nil, suggesting no excess funds available for auction
 
4. Market Implications and Outlook
 
- The rupee’s mild depreciation may reflect investor caution ahead of global central bank decisions
 
- Liquidity absorption hints at RBI’s intent to manage inflationary pressures without disrupting credit flow
 
- Analysts expect continued fine-tuning operations as monsoon-linked spending and bond issuances  pick up
 
Sources: Reuters India, Reserve Bank of India Press Release July 22, 2025, Economic Times, Moneycontrol, Outlook Business, World News Network India Edition

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