The banking system has been reeling under a liquidity deficit since December 16th due to outflows on account of advance tax and GST payments.
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PRIYANSHU SINGH
The banking system has not seen the usual phenomenon of liquidity bouncing back at the beginning of the month this time around, with the surplus as on January 01, 2026, placed at a modest ₹23,865 crore.
The system usually sees a surplus of ₹1-1.5 lakh crore at the beginning of the month, with Government spending releasing liquidity.
The banking system has been reeling under a liquidity deficit since December 16th due to outflows on account of advance tax and GST payments. This prompted the RBI to announce liquidity infusion measures.
The liquidity surplus is only modest (surplus at ₹23,865 crore and ₹17,335 crore on January 1, 2026 and December 31, 2025, respectively) is despite the RBI undertaking liquidity injection measures OMO (open market operation) purchase of government securities (G-Secs) of ₹1 lakh crore and a 3-year USD/INR Buy Sell swap of $5 billion last month to inject durable liquidity into the system and the cent.
Liquidity infusion measures
Further, the central bank has embarked on another round of liquidity infusion measures — OMO purchase auctions of G-Secs for an aggregate amount of ₹2 lakh crore in four tranches of ₹50,000 crore each (on December 29, 2025, January 05, 2026, January 12, 2026, and January 22, 2026) and USD/INR Buy/Sell Swap auction of $10 billion for a tenor of 3 years to be held on January 13, 2026.
V Rama Chandra Reddy, Head – Treasury, Karur Vysya Bank, said: “Liquidity in the system is driven by two players – RBI and Government of India. The Government holds liquidity surplus temporarily with RBI. This can create tightness. But the liquidity gets released either towards month-end or beginning of the month when the Government spends money…Further, if RBI’s forward Dollar sales mature, liquidity gets impacted.
“Normally, there should be a surplus of ₹1-1.5 lakh crore in the beginning of the month. For example, in the beginning of December 2025, the banking system had surplus liquidity of ₹2.5-2.7 lakh crore. Now the surplus is a very moderate.” He expects comfortable liquidity conditions to return towards January-end.
Published on January 2, 2026
