RBI's Malhotra sees Rs 3-4 lakh crore liquidity absorption through currency leakage; CRR least preferred
Economic Times 1 hr ago·7 Oct 2026, 8:57 am
The Reserve Bank of India (RBI) has projected that a significant portion of the banking system's surplus liquidity will be absorbed within the financial year 2026-27. Governor Sanjay Malhotra indicated that this absorption will primarily occur through "currency leakage" and other standard liquidity operations.
This development is noteworthy as it signals a shift in the central bank's approach to managing excess cash in the system. By prioritizing other tools over the Cash Reserve Ratio (CRR), the RBI aims to maintain a balance between supporting growth and ensuring financial stability without imposing immediate, heavy costs on banks.
Investors should monitor the RBI's upcoming policy statements for clarity on the pace of this liquidity withdrawal. A gradual reduction in surplus funds is generally viewed positively for the banking sector, as it can improve net interest margins and profitability for lenders.
Excerpt from Economic Times
Published On Oct 7, 2026 at 02:27 PM IST The Reserve Bank of India expects Rs 3-4 lakh crore of liquidity to be absorbed through currency leakage over the course of a year, while the central bank will use multiple tools to manage the current surplus liquidity, Governor Sanjay Malhotra said on Wednesday. “Within this…Read the original at Economic Times
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