Archive · 7 Sep 2026
RBI Weighs Tools to Manage ₹11.16 Lakh Crore Liquidity Surplus
India’s banks currently have much more money than they immediately need.
This extra money is called surplus liquidity.
Much of it entered the banking system because foreign investors and borrowers brought foreign currency into India.
The RBI wants the overnight interest rate to stay close to its policy rate of 5.25%.
It has tried auctions that temporarily take money out of banks, but banks did not offer as much money as the RBI expected.
Union Bank of India says the RBI may use several tools to hold back more of the excess money.
Some tools work quickly but need to be repeated, while others keep money locked away for longer.
The bank expects the RBI to gradually absorb the surplus while considering future credit growth.
It also expects possible interest-rate increases later in fiscal 2027 if inflation and other risks remain high.
India’s banking-system liquidity surplus reached ₹11.16 lakh crore, driven largely by foreign-currency inflows.
Core liquidity rose to ₹8.05 lakh crore by mid-August from ₹4.82 lakh crore in mid-June.
Union Bank of India projects core liquidity could reach ₹14.17 lakh crore by mid-September.
Recent variable-rate reverse repo auctions absorbed ₹6.12 lakh crore but were undersubscribed.
The RBI may combine short-term VRRR operations with incremental CRR, FX swaps and bond sales to absorb the surplus.
- Who
- The Reserve Bank of India, with analysis from Union Bank of India, is managing the surplus liquidity.
- What
- The banking system has a large liquidity surplus, prompting the RBI to consider additional absorption tools.
- When
- The surplus was reported at ₹11.16 lakh crore; core liquidity stood at ₹8.05 lakh crore by mid-August, with a projection of ₹14.17 lakh crore by mid-September.
- Where
- Across India’s banking and money markets.
- Why
- Large foreign-currency inflows have expanded rupee liquidity, while the RBI wants to keep the weighted average call rate near its 5.25% repo rate and contain inflationary pressure.
- System liquidity surplus
- ₹11.16 lakh crore
- Core liquidity by mid-August
- ₹8.05 lakh crore, up from ₹4.82 lakh crore in mid-June
- Projected core liquidity
- ₹14.17 lakh crore by mid-September, under Union Bank of India’s illustrative model
- Foreign-currency inflows
- $136.4 billion mobilised, including $127.2 billion through the FCNR(B) window
- Foreign-exchange reserves
- A record-high $729.3 billion
- Policy repo rate
- 5.25%, with the RBI seeking to keep the weighted average call rate close to it
- Recent VRRR absorption
- ₹6.12 lakh crore absorbed through two auctions on September 7, though both were undersubscribed
- Possible future rate path
- Union Bank of India expects two or three 25-basis-point increases, potentially taking the repo rate to 5.75%-6.00%