Mumbai: The Reserve Bank of India (RBI) could inject another ₹1 lakh crore in February - March 2026 to ensure that banking system liquidity remains consistently surplus through the fiscal year-end, economists and treasury heads said.
The move is aimed at encouraging banks to lower lending rates and boost credit demand.
Liquidity has remained in deficit since mid-December, forcing banks to borrow daily from RBI - a sign of tight conditions that have constrained lenders from reducing rates despite a 25-basis-point policy rate cut by the central bank earlier this month.
"To ensure that banking system liquidity surplus stays at 1% of NDTL on a consistent basis until March 2026, there could be space for additional ₹1 lakh crore of OMO (open market operation) purchases in February-March 2026," stated a research report authored by Gaura Sengupta, chief economist at IDFC First Bank.
RBI has said it aims to maintain surplus liquidity of 1% of net demand and time liabilities, which currently equates to ₹2.5 lakh crore.
On December 23, the central bank announced a ₹2.9 lakh crore liquidity infusion between December-end and January. This includes bond purchases through OMOs in four tranches of ₹50,000 crore each and a $10 billion buy-sell forex swap.
The measures are intended to offset persistent liquidity drain from foreign exchange interventions and tax outflows. Liquidity turned into deficit after advance tax payments in mid-December, neutralising earlier infusions of ₹1 lakh OMO and $5bn forex swap.
Elevated core liquidity - tracking at ₹3.7 lakh crore after recent OMOs - suggests banking system liquidity will swing back to surplus by end-December as government spending accelerates, Sengupta said in the report.
"RBI aims to maintain durable liquidity through OMOs and FX swaps to ensure smooth monetary transmission and support growth amid benign inflation," said VRC Reddy, head of treasury at Karur Vysya Bank. "Current liquidity conditions are accommodative, aided by policy measures, but FX interventions - driven by a marginally negative balance of payments and forward dollar sales near $65-70 billion - pose a structural drain. To offset this, RBI will continue deploying OMOs and swaps, supplemented by short-term tools like VRR/VRRR."
VRR, or Variable Rate Repo, is an RBI tool for banks to borrow short-term funds, while VRRR, or Variable Rate Reverse Repo, is used by RBI to absorb excess money from banks and keep short-term interest rates stable.