Reserve Bank of India Sells Securities to Drain Liquidity

The Reserve Bank of India is executing a multi-stage strategy to absorb a significant liquidity surplus in the banking system, which reached approximately 6.05 lakh crore by September 20, 2026. This surplus was driven by month-end government expenditures and heavy foreign currency inflows, including 132.980 billion USD in Foreign Currency Non-Resident (Bank) deposits and a special dollar-rupee swap facility totaling 143.596 billion USD.

To manage this excess, the central bank launched a 1 lakh crore open market operation (OMO) sale of government securities across three tranches. On September 21, the bank accepted 25,000 crore in bids for securities ranging from GS 2028 to GS 2032. Following this, the bank absorbed 71,971 crore in liquidity on September 22 through an overnight Variable Reverse Repo Rate (VRRR) auction, accepting bids for 96% of the notified 75,000 crore amount at a rate of 5.24%.

The program will conclude with a final 25,000 crore OMO sale on September 28, featuring six government securities with maturities between March 2029 and August 2032. These combined measures aim to curb inflation and align overnight call money rates with the repo rate in anticipation of a potential rate hike cycle.