All about liquidity management: Keep call money rate close to repo rate

While the repo window serves as a monetary stabilisation mechanism that the RBI uses as a daily liquidity management tool, the repo rate is an interest rate signal

The Reserve Bank of India (RBI) has called a bankers’ meeting this week to discuss its liquidity management framework. The subject of discussion — just a week before the RBI’s first bi-monthly monetary policy for 2025-26 (FY26) — has sparked intense speculation in the market. Bond dealers and treasury managers are wondering whether the central bank is considering new instruments to manage liquidity.

 

Last week’s Banker’s Trust column (“The liquidity conundrum”) dealt with the issue in detail – exploring the instruments at the RBI’s disposal and their usage. Let’s take a deeper dive.

 

On the coffee table, we’ve been discussing