RBI Drains ₹3.93 Lakh Crore to Manage Surplus Liquidity

Banks had much more cash than they immediately needed.

The RBI took back ₹3.93 lakh crore through an auction.

It did this to keep short-term interest rates close to its main policy rate.

Extra cash came partly from foreign-currency deposits exchanged for rupees.

Government spending on salaries and pensions also added money to the banking system.

More cash can make loans cheaper because banks have more money to lend.

However, banks may offer lower interest rates on new fixed deposits when they already have plenty of cash.

The RBI also plans to sell government securities to remove more money from the system.