The expansion in RBI’s balance sheet has coincided with a sharp increase in currency demand
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PTI

The Reserve Bank of India (RBI) stood out among major central banks in FY26, recording a sharp expansion in its balance sheet even as several developed-market central banks continued to moderate or shrink their assets. RBI assets grew 20.6 per cent year-on-year (y-o-y) in FY26, the fastest pace in six years (since FY20) and significantly higher than the 8.2 per cent growth in FY25. This increase comes at a time when central banks in advanced economies are still unwinding the extraordinary liquidity measures introduced during the pandemic years.

Asset growth and money supply diverge across economies

Data from central bank reports show a widening contrast between emerging and developed economies. RBI’s assets expansion is much higher than the 4 per cent growth in Indonesia’s central bank assets till December 2025.

According to Madan Sabnavis, Chief Economist at Bank of Baroda, there are three operational reasons behind the RBI’s balance sheet growth. “First, the RBI maintains a prudential contingency buffer, typically in the range of 4.5 to 7.5 per cent, which requires it to hold adequate reserves on its balance sheet at all times. Second, the RBI regularly intervenes in the foreign exchange market by purchasing foreign currency to manage rupee volatility, and every such purchase automatically expands the balance sheet. Third, Open Market Operations where the RBI buys government securities from the market to inject liquidity, similarly adding to the asset side of the balance sheet.”

In contrast, the balance sheets of the European Central Bank, the US Federal Reserve, the Bank of England and the Bank of Japan either contracted or recorded only marginal changes in recent years as policymakers focused on normalising monetary conditions.

The divergence is also visible in money supply growth. RBI’s broad money supply expanded by 13 per cent in FY26, accelerating from 9.6 per cent in FY25. Bank Indonesia recorded 9.7 per cent growth in money supply till March, of 2026. Among developed economies, money supply growth remained much lower, ranging between 2 per cent and 4.6 per cent in 2026.

Currency in circulation sees strongest rise in years

The expansion in RBI’s balance sheet has coincided with a sharp increase in currency demand. The volume of banknotes in circulation grew by 10.5 per cent in FY26, the highest growth rate since FY21 and almost double the 5.6 per cent increase recorded in FY25.

Sabnavis explained, “creating adequate liquidity in the market is a primary mandate of any central bank, and RBI’s expansion simply reflects that duty being fulfilled.”

Currency circulation growth had moderated steadily after the pandemic, falling from 7.2 per cent in FY21 to 4.4 per cent in FY23 before recovering to 7.8 per cent in FY24. The latest acceleration suggests a renewed increase in cash usage alongside overall economic expansion.

According to Anindya Banerjee, Head of Research, Kotak Securities, “the distinction between the expansion in 2020 and 2026 was apparent. In 2020, the RBI expanded its balance sheet deliberately to prevent financial collapse; that was emergency liquidity with direct inflationary risk. In 2026, the expansion is the natural output of apex body functions, forex management, and liquidity offsetting.”

The writer is an intern with businessline

Published on June 18, 2026

Gujarat has stepped up preparations for a possible El Niño impact during the ongoing monsoon season, expanding the coverage of its Narmada-based water supply network, directing the filling of more than 300 lakes and rolling out contingency crop plans for farmers.

The measures were reviewed at a high-level meeting chaired by Chief Minister Bhupendra Patel in the state capital Gandhinagar on Thursday, amid concerns over the delayed onset of the monsoon and forecasts indicating the possibility of El Niño conditions. As part of the preparedness plan, the state has decided to extend the eligibility for lake-filling under the Narmada pipeline network. While lakes located within a 3-km radius of the pipeline were earlier covered, the limit has now been expanded to 7 km.

The move is expected to bring more than 300 lakes in North Gujarat under the ambit of Narmada water supply through the Sujalam Sufalam initiative. The government has also directed authorities to prioritise filling reservoirs linked to the SAUNI (Saurashtra Narmada Avtaran Irrigation) Yojana to ensure drinking water availability across Saurashtra.

Agriculture Minister Jitu Vaghani said various departments, including agriculture, irrigation, water resources, revenue and animal husbandry, have drawn up coordinated plans to mitigate the impact of any rainfall shortfall. The Agriculture Department has prepared a contingency crop planning framework that includes advisories on alternative crops, short-duration varieties and low-water-requirement crops in the event of deficient rainfall. The state will also use its AI-based Krushi Pragati platform to disseminate weather alerts and crop advisories to more than 50 lakh farmers through mobile messaging.

Officials said adequate stocks of seeds and fertilisers for the ongoing Kharif season are available across Gujarat. The government has also asked animal husbandry and forest departments to ensure adequate fodder availability. According to officials, Gujarat currently maintains fodder reserves sufficient for nearly two years. Vaghani said historical rainfall data showed that El Niño years do not necessarily translate into drought conditions in Gujarat. The state witnessed above-normal rainfall in 2006 and 2023 despite severe El Niño events, he noted.

Published on June 18, 2026