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RBI raises daily reserve requirement and plans another bond sale

English हिंदी ಕನ್ನಡ മലയാളം தமிழ் తెలుగు
First brief 3 Sep, 12:11 am IST Updated 10 Oct, 11:53 am IST 20 developments 11 min read Latest ↓
File: RBI headquarters, Mumbai
Sailko · CC BY 3.0

Where it stands

Banks will have less room to vary their daily cash reserves with the RBI from 16 October. The minimum they must maintain each day rises from 90% to 99% of their required Cash Reserve Ratio balance. This changes the daily maintenance rule, not the overall CRR rate. Suppose a bank is required to maintain an average reserve of ₹100 over the reporting period. The old daily minimum would be ₹90; the new daily minimum would be ₹99. The required average remains ₹100. The change leaves the bank less flexibility to hold a lower reserve on one day and make up the difference later. It does not mean banks must hand over 99% of customer deposits. Nor does it directly change the interest rate on an individual's account. The immediate effect is tighter management of banks' daily available cash. Separately, the RBI plans to sell government securities with a total face value of ₹25,000 crore on 13 October. Successful buyers are due to pay on 14 October. The planned sale would absorb rupee funds when settled; it is not money already removed from the banking system.

Background

Banks need rupee funds to settle payments and meet daily obligations. They must also maintain prescribed cash reserves with the RBI. The amount required over the reporting period and the minimum required on each day are related, but they are not the same rule. The earlier daily minimum allowed banks some flexibility around the required average. A bank could hold less on one day, within the permitted floor, and hold more later. Raising that floor to 99% reduces this flexibility while leaving the prescribed average requirement unchanged. The RBI also manages banking-system liquidity through purchases and sales of government securities. When it sells securities it already owns, buyers pay rupees to the RBI and receive the bonds. This reduces funds available in the banking system after payment is completed. These operations differ from changing the policy interest rate. An outright bond sale also differs from a reverse repo, which includes an agreed reversal. The tools can support monetary-policy implementation through different channels. They do not erase banks' obligations to depositors. Earlier developments in this story concerned foreign-currency swaps and bond sales. A swap can initially provide rupees to banks in exchange for dollars, followed by a later reverse exchange. Bond sales can absorb surplus rupees. The new daily-reserve rule adds a separate constraint on how banks manage those funds.

How it developed

  1. 5 June to 8 June 2026
    How it started

    RBI announced the swap facility on 5 June 2026 to attract dollars

    RBI Governor Sanjay Malhotra announced the measures on 5 June 2026. The Governor cited the West Asia conflict and high energy prices. Net foreign portfolio outflows had reached $13.7 billion since 1 April 2026. The RBI offered to bear the full hedging cost on fresh three-to-five-year FCNR(B) deposits. The RBI also offered a concessional swap for external commercial borrowings by public sector units. The facility opened on 8 June 2026. The FCNR(B) window was to run until 30 September 2026. The RBI used the same tool in September 2013 under Governor Raghuram Rajan. The 2013 swap cost banks a fixed 3.5 per cent a year. The 2013 windows raised about $34 billion by 30 November.

    Reserve Bank of IndiaPTIBusiness Standard
  2. 14 August 2026
    New fact

    RBI closes the FCNR(B) window a month early, on 31 August

    On 14 August 2026 the RBI moved the FCNR(B) deadline from 30 September to 31 August 2026. The RBI cited the encouraging response and the resulting forex inflows. Inflows had reached $56.85 billion by 13 August. FCNR(B) deposits made up $52.3 billion of that total. Banks got until 11 September 2026 to complete swaps on eligible deposits. Nine days earlier Governor Malhotra had said there was no proposal to close the scheme early.

    Reserve Bank of IndiaBusiness StandardBusiness Today
  3. 31 August to 1 September 2026
    Consequence

    Window shuts on 31 August as liquidity hits a four-year high

    The FCNR(B) window closed on 31 August 2026. The liquidity surplus in the banking system reached Rs 6.65 trillion on 31 August. Business Standard called the surplus the highest since 19 April 2022. On 1 September the RBI offered to absorb Rs 10 trillion through two reverse repo auctions. Banks parked only Rs 3.74 trillion. The rupee closed at 94.95 to the dollar on 1 September, a two-month high.

    Reserve Bank of IndiaIANSBusiness Standard
  4. 2 September 2026
    New fact

    RBI counts $127.23 billion from FCNR(B) deposits, $136.38 billion in all

    The RBI released the full tally on 2 September 2026. Banks raised $127.23 billion through FCNR(B) deposits by 31 August. Borrowings added $9.15 billion, taking the total to $136.38 billion. Inflows had stood at only $72.85 billion on 21 August. Business Standard said the market had expected $90-100 billion. ICICI Bank alone raised $17.88 billion.

    Reserve Bank of IndiaIANSBusiness Standard
  5. 2 September 2026
    Consequence

    Liquidity surplus tops Rs 7.75 trillion, call rate falls to 5.02 per cent

    The liquidity surplus rose to Rs 7.76 trillion on 1 September 2026. On 2 September the RBI offered to absorb Rs 5 trillion through an overnight reverse repo auction. Banks offered Rs 4.6 trillion. The weighted average call rate settled at 5.02 per cent, down from 5.16 per cent. The call rate is now close to the standing deposit facility rate of 5 per cent. The RBI announced another Rs 6 trillion auction for 3 September.

    Reserve Bank of IndiaBusiness Standard
  6. 2 September 2026, night
    New fact

    GIFT City banks sanctioned $54 billion under the swap facility

    Banks at GIFT City in Gujarat took a large share of the swap money. The International Financial Services Centres Authority (IFSCA) released the figures on 2 September 2026. Twenty international banking units at GIFT-IFSC sanctioned $54.02 billion under the facility by 31 August. The units disbursed $52.82 billion. Sanctions stood at $28.60 billion on 14 August and $37.26 billion on 21 August. The units raised the money in the United Kingdom, the United States, Mexico, West Asia, Hong Kong, Singapore and Africa. The facility for external commercial borrowings and overseas borrowings stays open until 31 December 2026.

    Business Standard
  7. 3 September 2026, morning
    Consequence

    Rupee rises to 94.27, its strongest since June, on the inflows

    On 3 September 2026, the rupee opened 69 paise stronger at 94.29 to the dollar. The rupee touched 94.27 in morning trade. That is the strongest level since 29 June 2026. The rupee had closed at 94.98 on 2 September. Dealers credited the dollar inflows under the swap facility. The inflows were well above the $80 billion to $90 billion economists had expected. The larger reserves give the Reserve Bank of India more room to steady the rupee. A treasury adviser said the RBI can now cover its short-term dollar positions from these deposits.

    Business Standard
  8. 3 September 2026, close of trade
    Consequence

    Rupee closes at 94.49. Liquidity surplus hits a record Rs 9.7 trillion.

    The rupee closed at 94.49 to the dollar on 3 September 2026, up 49 paise. The close is the strongest since 25 June 2026. Dealers said the RBI also sold dollars to steady the rupee. RBI data showed a record liquidity surplus of Rs 9.70 trillion on 2 September. The previous high was Rs 9.2 trillion in September 2021. The call rate fell to 4.95 per cent, below the 5 per cent standing deposit facility rate. Banks parked Rs 5.53 trillion in two RBI reverse repo auctions on 3 September.

    Reserve Bank of IndiaReutersBusiness Standard
  9. 4 September 2026
    Consequence

    Banks park ₹6.02 trillion in two three-day RBI auctions

    RBI held two three-day variable rate reverse repo auctions on 4 September 2026. Banks placed ₹5,41,975 crore in the first auction. Banks placed ₹60,419 crore in the second auction. Both auctions cleared at 5.24 per cent. The combined absorption was ₹6,02,394 crore. RBI data put net liquidity absorption at ₹10,31,465.50 crore on 3 September. The overnight call rate was 4.95 per cent.

    Reserve Bank of IndiaBusiness Standard
  10. Announced 4 September 2026
    Official response

    RBI announces a ₹7 trillion, 30-day liquidity absorption operation

    RBI announced a 30-day variable rate reverse repo operation on 4 September 2026. The notified amount is ₹7,00,000 crore. Bidding will take place on 7 September. The operation will reverse on 7 October 2026. Banks may request an early reversal under RBI's stated conditions. The longer operation can absorb surplus funds beyond overnight and three-day auctions.

    Reserve Bank of India
  11. Week ended 28 August; released 4 September 2026
    Consequence

    Forex reserves rise $11.475 billion to a record $740.803 billion

    India's foreign exchange reserves reached $740.803 billion in the week ended 28 August 2026. The reserves rose by $11.475 billion during the week. Foreign currency assets rose by $9.337 billion to $600.670 billion. Gold reserves rose by $2.191 billion to $116.409 billion. Special drawing rights fell by $43 million to $18.810 billion. India's reserve position in the IMF fell by $11 million to $4.914 billion. Dollar values also reflect movements in non-US reserve currencies.

    Reserve Bank of IndiaAkashvani NewsBusiness Standard
  12. 4 September 2026, evening
    Consequence

    Dealers see higher odds of a rate rise at the October policy

    RBI's 30-day reverse repo operation will reverse on 7 October 2026. The Monetary Policy Committee meets from 5 to 7 October 2026. Business Standard reported on 4 September 2026 that the chances of an October rate rise have increased. A rise would be the first of this cycle. A private bank's treasury head said a rate rise 'now seems like the most preferable tool for the RBI'. Dealers said the early-reversal option suggests no further liquidity steps before the policy meeting. Bank of Baroda chief economist Madan Sabnavis expects more swap inflows until 11 September 2026. Sabnavis expects foreign currency assets to reach about $640-650 billion.

    Reserve Bank of IndiaBusiness Standard
  13. 4 September 2026, evening
    Consequence

    Banks expect funding costs to fall by up to 50 basis points

    Senior bank officials spoke to Business Standard on 4 September 2026. The officials expect surplus liquidity to cut banks' cost of funds by up to 50 basis points. A certificate of deposit is a short-term instrument banks use to borrow money. Prime Database data show banks raised ₹68,130 crore through certificates of deposit in August 2026. August's total was the lowest since April 2026. The three-month certificate of deposit rate was 7.16 per cent on 8 June 2026. The rate fell to 5.86 per cent on 3 September 2026. Brokerage Jefferies expects banks to lower wholesale funding rates.

    Business StandardBusiness Today
  14. 7 September 2026; auction results
    New fact

    Banks park ₹2,59,276 crore in RBI’s 30-day auction

    RBI accepted ₹2,59,276 crore in its 30-day reverse repo auction on 7 September 2026, against ₹7,00,000 crore offered. An overnight auction accepted ₹3,53,390 crore against ₹5,00,000 crore offered. Both cleared at 5.24%. These operations absorb spare bank money for different periods. Business Standard reported an e-Kuber problem, citing market participants. RBI had not commented on that reported problem at the newspaper’s press time.

    Reserve Bank of IndiaReserve Bank of IndiaBusiness Standard
  15. 4 September 2026; data released 11 September
    New fact

    Foreign exchange reserves rise to $785.706 billion

    India’s foreign exchange reserves reached $785.706 billion on 4 September 2026, up $44.903 billion from the previous week. Foreign-currency assets rose by $47.498 billion to $648.168 billion. A $2.594 billion fall in the value of gold holdings partly offset that increase. Reserve values can change because of money flows and changes in asset prices or exchange rates. The weekly total alone does not show how much each factor contributed. These figures measure foreign reserves, while RBI’s planned bond sales address surplus rupees within the banking system.

    Reserve Bank of IndiaBusiness Standard
  16. 11 September 2026; auctions scheduled later in September
    New fact

    Three September auctions will offer ₹1,00,000 crore of bonds

    RBI announced outright sales of government securities on 11 September 2026. The first auction, on 17 September, will offer ₹50,000 crore. Auctions on 21 and 28 September will offer ₹25,000 crore each. Buyers pay for bonds from RBI’s holdings, absorbing money from the banking system. Unlike a reverse repo, the sale does not automatically reverse after a fixed short period. RBI may accept less than the announced amount. The first auction’s successful participants must provide funds by noon on 18 September. These are scheduled operations, not completed sales or a new policy-rate decision.

    Reserve Bank of IndiaBusiness Standard / Bloomberg
  17. 17 September 2026; settlement due 18 September
    New fact

    The first auction accepts the full planned face value

    RBI accepted the full ₹50,000 crore offered across six government securities. Previously, this amount was only a proposed sale and RBI could have accepted less. The accepted bids now establish the first auction’s result, while settlement remains a separate step. Buyers exchange rupee funds for bonds when the transaction settles. This reduces funds available in the banking system without cancelling depositors’ claims on their banks. It also differs from a short-term reverse repo, which reverses on a specified date. The two later ₹25,000 crore auctions have not yet taken place. Their scheduled amounts should not be added to the first result as money already absorbed.

    Reserve Bank of IndiaBloomberg / Business StandardANI / NewKerala
  18. 21 September 2026; second bond-sale result
    New fact

    Accepted bids reach ₹75,000 crore across the first two auctions

    RBI accepted the full ₹25,000 crore face value offered in the second auction. Participants had bid for ₹84,982 crore, but bids submitted are not the same as bids accepted. Adding the earlier ₹50,000 crore result brings accepted face value to ₹75,000 crore. The second transaction is scheduled to settle on 22 September, when payment and delivery complete the agreed exchange. Its cash effect depends on the actual auction prices, not only the bonds’ face value. The remaining notified auction is ₹25,000 crore on 28 September. This result updates an existing liquidity operation rather than announcing a new policy-rate decision.

    Reserve Bank of IndiaBusiness Standard / PTI
  19. 21 September 2026; swap-scheme data release
    New fact

    Updated figures distinguish deposits from overseas borrowing

    RBI’s data reported through 18 September put the scheme’s total at $143.596 billion. Foreign Currency Non-Resident (Bank) deposits account for $132.980 billion. Overseas foreign-currency borrowing by banks contributes $5.320 billion, and external commercial borrowing contributes $5.296 billion. The three components sum to the reported total; they are not three separate additions to it. The deposit-mobilisation window ended on 31 August, while the two borrowing windows remain available through 31 December 2026. A later data release does not mean the deposit window has reopened. The figures describe funding under the scheme, not the complete stock of India’s foreign-exchange reserves.

    Reserve Bank of IndiaBusiness Standard
  20. 9 October 2026; daily rule starts 16 October
    New fact

    Banks must maintain almost all their required reserve each day

    From the reporting fortnight beginning 16 October, scheduled banks must maintain at least 99% of their required CRR balance each day. The previous daily minimum was 90%. The RBI has left the prescribed average CRR requirement unchanged. This narrows the gap banks can use when managing cash from day to day. It is a change in the timing and consistency of reserve maintenance, not a requirement to reserve 99% of deposits. The effect on an individual bank depends on how much daily flexibility it previously used.

    Reserve Bank of IndiaBusiness Standard
  21. 9 October 2026; auction scheduled for 13 October
    New fact

    A ₹25,000 crore bond auction is scheduled for 13 October

    The RBI has announced an outright sale of six government securities with an aggregate face value of ₹25,000 crore. Bidding is scheduled for 13 October, with payment due on 14 October. The RBI can accept less than the announced amount or reject bids. Face value is the bonds' nominal amount, not necessarily the rupees that buyers will pay. Auction results and settlement are therefore needed to establish the actual transaction. Until then, the amount describes a planned operation rather than completed absorption.

    Reserve Bank of IndiaBusiness Standard

Why it matters for UPSC

GS3 · Indian economyGS3 · External sectorGS3 · Monetary policy

Distinguish the CRR rate from its daily maintenance requirement. Use the ₹100 example to explain who faces a tighter constraint and why. Compare reserve maintenance with an outright bond sale, separating an auction announcement, accepted bids and actual settlement.

Key terms

FCNR(B) depositFCNR(B) stands for Foreign Currency Non-Resident (Bank). An FCNR(B) deposit is a fixed deposit held in a foreign currency by a non-resident Indian. A nurse working in Dubai can keep her dollar savings in an Indian bank this way. The money is not converted into rupees. So the depositor carries no rupee exchange risk. A Non-Resident External (NRE) deposit is different. An NRE deposit is converted into rupees.
Forex swapA forex swap exchanges currencies in two steps. In the first step the bank sells dollars to the RBI and receives rupees. Years later the bank buys the same dollars back. Under the 2026 facility both steps use the same exchange rate. So the RBI carries the cost if the rupee falls in between. Bankers call this the hedging cost. The RBI swaps only the principal, not the interest.
Liquidity surplus and call rateLiquidity surplus is the spare money banks hold beyond their daily needs. Banks park the spare money with the RBI. A larger surplus pushes overnight interest rates down. The call rate is the rate at which banks lend to each other overnight. The weighted average call rate is the RBI's operating target for monetary policy. The RBI soaks up spare money through variable rate reverse repo auctions.
External commercial borrowing (ECB)An external commercial borrowing is a loan an Indian company raises from a lender abroad. The 2026 facility offers a concessional swap on such loans. Under the facility an ECB needs an average maturity of three years or more. ECBs under the facility totalled $3.89 billion by 31 August 2026. The ECB window stays open until 31 December 2026.
Overseas foreign currency borrowing (OFCB)An overseas foreign currency borrowing is money an Indian bank raises abroad in a foreign currency. Banks can swap this money with the RBI under the same facility. OFCBs under the facility totalled $5.26 billion by 31 August 2026. The OFCB window stays open until 31 December 2026.
Foreign exchange reservesForeign exchange reserves are the foreign currency, gold and IMF assets held by the RBI. Reserves stood at $682.3 billion on 29 May 2026. Reserves rose to $729.3 billion on 21 August 2026. Dollars taken in under the swap add to reserves for now. The RBI must hand the same dollars back when each swap ends. So the swap dollars are a temporary addition, not a permanent one.
Open market operation (OMO)RBI buys or sells government securities to influence money available in the banking system. A purchase adds money; a sale absorbs money. An outright sale has no agreed short-term reversal date. It does not mean the government is raising fresh borrowing through that sale.
Reverse repoAn operation in which RBI absorbs funds against securities with an agreement to reverse the transaction. The money returns when the operation reverses under its terms. A variable-rate auction lets participants bid rates. This differs from an outright bond sale and from changing the policy repo rate.
Notified auction amountThe amount RBI announces it intends to offer in an auction. It is not the final amount accepted or settled. For the September bond sales, RBI retains the right to accept less, reject bids or make limited adjustments. Results are needed to know the actual absorption.
Face value and auction priceFace value is the nominal amount attached to a bond. Its market price can be above or below that value. The auction’s ₹50,000 crore accepted figure is face value, so the cash payment may differ.
SettlementCompletion of an agreed financial transaction through payment and delivery of the securities. Accepting a bid fixes the auction result; settlement carries out that transaction. For this first sale, RBI’s schedule requires successful participants to have funds available by noon on 18 September.
Cash Reserve RatioCRR is the prescribed share of relevant bank liabilities that banks must maintain as cash reserves with the RBI. The overall requirement is distinct from the daily minimum used to maintain it. The October change raises that daily minimum, not the CRR rate itself.
Daily reserve minimumThe lowest balance a bank must maintain on each day relative to its required reserve. The floor rises from 90% to 99%. A higher daily floor reduces flexibility to hold less on one day and compensate later, even when the required average is unchanged.
Reporting fortnightThe two-week period used for the relevant reserve-maintenance calculation. Banks must satisfy both the average requirement and the applicable daily floor. Meeting an average does not permit a bank to fall below the daily minimum.
Sources (44)
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