RBI liquidity support has increased as tighter cash conditions push up Indian banks’ short-term borrowing costs. An ICICI Bank report highlighted on October 27, 2026, said the Reserve Bank of India had begun variable-rate repo auctions, including a seven-day operation worth ₹1 lakh crore, after the banking system’s liquidity surplus narrowed sharply.
Key Takeaways
- The banking system’s liquidity surplus stood at ₹50,000 crore on October 23.
- Weekly average borrowing rates rose across call money, market repo and triparty repo.
- ICICI Bank expects further liquidity operations, while government spending and bond maturities could ease funding pressure.
RBI liquidity operations address a smaller cash surplus
The banking system’s surplus was equivalent to 0.2% of net demand and time liabilities as of October 23, 2026. ICICI Bank attributed the decline to Goods and Services Tax payments, higher cash reserve requirements and other factors.
The RBI’s variable-rate repo auctions provide short-term funds to banks. The intervention comes while the system remains in surplus overall, rather than after a reported shift into a liquidity deficit.
ICICI Bank expects the central bank to continue these operations. It also identified potential relief from government spending toward the end of October and the maturity of government securities worth ₹35,400 crore. Those are possible sources of additional cash, not evidence that funding conditions have already eased.
| Item | Details |
|---|---|
| Weekly average rate | Previous week → latest week cited by ICICI Bank |
| Call money | 5.48% → 5.70% |
| Market repo | 5.37% → 5.66% |
| Triparty repo | 5.55% → 5.65% |
Higher funding costs spread across money markets
The weekly average call rate, which measures short-term borrowing between banks, rose alongside rates in the market repo and triparty repo segments. The increases indicate that the cash squeeze was visible across several funding channels.
CCIL’s explanation of triparty repo describes an arrangement in which a third-party agent facilitates services such as collateral selection, payment, settlement and custody. This explains the structure of that funding market; it does not verify the latest reported rates.
Oil concerns add pressure to government bonds
ICICI Bank also pointed to rising oil prices amid the conflict in West Asia as a source of inflation concerns and pressure on government bond yields. At the Centre’s government securities auction, the average borrowing cost rose by 20 basis points to 7.60%.
The auction’s bid-to-cover ratio was 1.9, below a long-term average of 2.8. The ratio compares bids received with the amount of securities offered, making the lower reading an indication of weaker auction demand relative to that historical benchmark.
ICICI Bank expects the 10-year benchmark government bond yield to trade between 7.40% and 7.60% in the near term and cautions that elevated oil prices could weigh on bond prices. That range is the bank’s forecast, not a confirmed trading outcome.
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