Liquidity Deficit

In December 2025, banks raised a total of ₹1.56 trillion through 176 CD issuances, followed by ₹1.48 trillion in January through 111 CDs and ₹2.67 trillion in February, according to data provided by Prime Database. These are set to mature in the coming months.

RBI faces a balancing act: keeping rates steady while injecting liquidity through OMOs or buy/sell swaps to support the rupee and bridging the widening credit-deposit gap.

Market participants told RBI in a pre-policy meeting that liquidity support is more critical than rate cuts for the February policy.

SBI’s rare move to raise ₹6,000 crore via certificates of deposit underscores tight liquidity and deposit stress, even as credit demand remains strong across the banking system.

To address liquidity tightness in India’s banking system, we need a proper diagnosis of what’s causing it, followed by remedial action. A temporary balm may just be glossing over a deep structural problem of bank deposits drying up.

RBI's actions are needed as benefits from the cut in cash reserve ratio—the percentage of a bank’s total deposits that must be kept with the RBI in cash—earlier this year, with two tranches of ₹62,500 crore each released already, have largely been offset by heavy outflows of rupee liquidity.

Despite RBI’s measures, liquidity has stayed in deficit since mid-December. After peaking at ₹3.3 trillion on 23 January, deficit cooled to ₹2.1 trillion as on 20 February, Bloomberg data showed.