Banking Liquidity Surplus Falls to ₹541 crore Amid Cash Crunch

Liquidity surplus in the banking system slipped to ₹541 crore on October 21, reflecting tighter cash conditions. Banks have boosted fund parking to satisfy the 99 % daily cash reserve requirement. The weighted average call rate rose to 5.65 %, sitting 15 basis points above the repo rate. The Reserve Bank of India stepped in with variable‑rate repo operations to inject ₹50,000 crore of liquidity. Bids for the operation totalled ₹1.62 lakh crore, showing strong demand for short‑term funds. RBI’s variable‑rate repo aims to balance systemic liquidity while keeping short‑term rates aligned with policy. The higher call rate and the large bid volume indicate a cash crunch that prompted the central bank’s aggressive stance.

Context

The cash reserve requirement forces banks to hold a near‑full share of deposits as liquid assets. When reserves tighten, the RBI uses repo operations to supply funds and prevent a spike in market rates. This mechanism helps keep borrowing costs stable for businesses and consumers.