economy
What is RBI's cost of liquidity management?
May 30, 07:05

Liquidity management is a crucial function of the Reserve Bank of India (RBI). Depending on whether banking system liquidity is in surplus or deficit, the RBI either pays or receives interest on its liquidity operations to ensure the call rate is close to the repo rate. Over the years, the RBI's net interest income (NII) from these liquidity operations has varied. Periods of sharp changes in this NII coincide with big policy changes: FY17 saw excess liquidity due to demonetisation, while the pandemic has seen the RBI pump money to safeguard the financial system. The result has been a huge rise in net interest outgo.

RBI'S NII FROM LIQUIDITY OPS MINI GFX