India’s banking system surplus liquidity fell to about ₹4.92 lakh crore on September 21, sharply below the ₹11.16 lakh crore peak recorded earlier in September. The Reserve Bank of India has been using bond sales, VRRR operations and forex measures to absorb excess liquidity. The RBI also absorbed ₹71,971 crore through an overnight VRRR auction on September 22 at a weighted average rate of 5.24%. Separately, government securities worth ₹75,000 crore had already been sold through two open-market operations, with another ₹25,000 crore sale scheduled for September 28. This matters for the banking sector because surplus liquidity had pushed short-term money-market rates unusually low. With liquidity tightening, the weighted average call rate moved to 5.31%, above the 5.25% repo rate. The next thing to watch is whether liquidity remains near these levels after the remaining OMO operation and month-end government flows. Stance: Liquidity is shifting from abundant to tighter, making short-term money-market conditions the key sector trigger. Tag: Macro Views | Post-Closing Commentary

HDFCBANK

#WatchOutFor