RBI Boosts Liquidity, Yet Banks Face Potential Deficit in Early 2026

• Despite headline surpluses in 2025, banking system liquidity often felt tight, leading to high funding costs and rising bond yields.
• RBI actively injected liquidity throughout 2025 using OMOs, USD/INR buy/sell swaps, and policy rate cuts to ease conditions.
• Key measures included a 100 bps CRR cut, releasing Rs 2.5 lakh crore, and significant OMO purchases to ensure durable liquidity.
• These actions helped improve monetary transmission, with money market and bond yields softening in line with policy rate cuts.
• Experts warn that despite recent large injections, banks may face a liquidity deficit in early 2026 due to factors like advance tax outflows.

Why It Matters: RBI's 2025 liquidity efforts faced market tightness, with a potential deficit looming in early 2026.