RBI likely to withdraw extra liquidity support after March
RBI additional liquidity support will likely end after March as market stress eases. Bankers expect the central bank to absorb surplus cash in the new fiscal year.
The Reserve Bank of India's (RBI) additional liquidity support for lenders is expected to wind down after March, according to market experts. This temporary calibration in India was aimed at easing short-term rates and improving the transmission of monetary policy during a period of market stress.
Banking system liquidity has maintained a surplus averaging 1.1% of deposits this month, exceeding the 1% threshold previously signaled by the central bank. This influx has driven the weighted average call rate to approximately 5%, falling below the 5.25% policy repo rate. Similarly, the secured overnight borrowing rate dropped to around 4.80%, reflecting the significant cash surplus in the system.
