RBI liquidity injections totaling ₹2.5 lakh crore came under criticism on October 23, 2026, as State Bank of India economist Soumya Kanti Ghosh questioned their consistency with the central bank’s stated policy of “calibrated tightening.” Three repo operations beginning October 19 added funds even as the Reserve Bank of India was also using auctions to absorb liquidity.
Key Takeaways
- Ghosh questioned whether liquidity injections matched the RBI’s October tightening message.
- The RBI used both liquidity-injecting repo auctions and liquidity-absorbing reverse repo auctions.
- The criticism concerned policy signals, not an announced change in the RBI’s stance.
Table of Contents
- RBI liquidity operations raise questions about policy signals
- Inflation and external stability complicate the message
- Conclusion
RBI liquidity operations raise questions about policy signals
The October 23 Ecowrap assessment highlighted a contrast between the RBI’s monetary policy communication and its subsequent money-market operations. Governor Sanjay Malhotra had emphasized using appropriate measures to absorb liquidity at the October policy meeting.
Ghosh, SBI’s group chief economic adviser and a member of the Prime Minister’s Economic Advisory Council, said the repo injections were difficult to reconcile with that message. He described the operations as “incoherent in a calibrated tightening mode.”
SBI’s October 23 Ecowrap listing identifies the publication as “From Divergence to Convergence in RBI Policy Communication.” That listing establishes the report’s date and title, rather than providing the underlying auction figures.
| Item | Details |
|---|---|
| Injection window | Three repo operations beginning October 19, 2026. |
| Total liquidity injected | ₹2.5 lakh crore, equivalent to ₹2.5 trillion. |
| Liquidity-absorption tool | Variable reverse repo rate auctions. |
| Stated policy stance | Calibrated tightening at the October 2026 monetary policy meeting. |
Inflation and external stability complicate the message
Ghosh said the governor’s October communication placed greater emphasis on external conditions and financial stability, and less on liquidity and monetary transmission, than the August policy communication.
In his assessment, widening geopolitical conflicts had increased concerns about external stability, while inflation concerns had prompted a rate increase. He argued that the combination of liquidity absorption and fresh injections signaled an effort to balance competing objectives.
Repo auctions supply funds to the banking system, while reverse repo auctions absorb them. The distinction is important: the criticism was about how those operations fitted the stated tightening stance, not evidence that the RBI had formally abandoned it. Ghosh’s question about a shift toward “mildly calibrated tightening” was his characterization, not a new central-bank policy announcement.
Conclusion
The issue is whether RBI liquidity operations reinforce or blur its tightening message. Subsequent auction operations and policy communication are the next evidence to watch; Ghosh’s criticism does not itself establish a change in the central bank’s stance.
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