Between February and June 2025, the weighted average lending rate of scheduled commercial banks fell by 71 basis points for fresh rupee loans, of which 55 bps was directly due to the repo rate cut
In theory, this could fuel demand-pull inflation, as more money chases goods and services. The RBI, however, is playing a cautious game.
VRR auctions fell to Rs 97,861 crore in May, compared to Rs 13,48,316 crore in January, indicating surplus liquidity
The RBI is aware that a rate cut amid a liquidity deficit is akin to a 'wasted bullet' and is thus rightly setting the stage for (potential) effective transmission by infusing liquidity into the system in the run up to the April 9 policy
Among the state-owned banks account for 62 percent of the CDs and Punjab National Bank raised Rs 2.16 lakh crore, the most by a lender, in FY25
A fresh surge in liquidity could stoke inflationary pressures, undoing the RBI’s hard-won price stability
This has happened after nine years for the 182-day T-Bill, and after 23 months for the 91-day T-Bill, as per RBI data. Last time, when the central bank did not accepted bids on 182-day and 91-day T-Bills was on February 24, 2016, and on March 29, 2023, respectively.
Liquidity deficit swung from Rs 30,000 crore to Rs 3 lakh crore between December 16 and February 14 due to tax outflows, RBI intervention in the forex market and limited spending by government, the central bank's data shows
Between February 10 and February 14, the central bank has infused Rs 9.81 lakh crore through daily VRR auctions
Banking system liquidity has been under stress in the last few weeks due to various reasons such as tax outflows, heavy intervention by RBI in forex market to sell dollars, and less government spending.
Deposit rates have risen consistently, but tight liquidity hasn’t forced banks to hike loan rates
The RBI’s forex operations are the biggest drag on liquidity
There are managed funds, which address investors seeking higher return from bonds, through actively participating in the interest rate and credit cycle opportunities
Rajiv Batra said India has rallied nearly 660% in last two decades, while US has gained only 440%, and this outperformance has come largely due to India's earnings potential.
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Currently, liquidity in the banking system is estimated to be in deficit of around Rs 1.20 lakh crore, as per RBI’s Money Market Operations as on May 15.
Currently, the overnight weighted average call money rate is trading at 6.4899 percent. Liquidity in the banking system stood at a Rs 1.58 lakh crore surplus on April 3.
At the current pace, DIIs could surpass FPI holdings in the next few quarters, with the gap between the two at an all-time low
The euphoria in mid, small and micro-cap shares continues unabated
The comfort in the policy tone was no surprise given the relatively tighter system liquidity (despite recent easing), and steadily easing core inflation despite stronger growth.
The RBI, which will release its next monetary policy on February 8, is expected to continue with finetuning operations
The central bank, which has been intervening with multiple instruments to manage the liquidity situation, infused Rs 2.5 lakh crore via a variable repo rate auction today.
Bond purchases would be incremental and linked to a rise in yields, say at every 3-4 basis points, the treasury head at the state-run bank said.
Tight liquidity conditions will enable better transmission of past policy rate hikes of 250 bps, which remains incomplete, in the RBI’s assessment
Currently, the liquidity in the banking system is estimated to be in deficit of around Rs 34,061.33 crore.