As of February 23, 2026, leading economists and reports from major Indian financial institutions indicate that the Reserve Bank of India (RBI) is likely to infuse at least ₹5 lakh crore into the banking system during the next fiscal year, FY27 (April 2026 – March 2027).
This proactive move is intended to balance the “supply shock” caused by the government’s massive borrowing program and to ensure that interest rates remain stable for consumers and businesses.
Why is the RBI Injecting This Much?
The projected infusion is a response to three major structural pressures on the Indian economy:
- Massive Government Borrowing: The Union Budget 2026–27 announced a gross market borrowing of ₹17.2 lakh crore. Combined with state and corporate borrowings, the total supply of bonds is estimated to hit ₹40 lakh crore in FY27. Without RBI intervention, this would cause bond yields (and interest rates) to spike.+1
- Monetary Transmission: The RBI has cut the repo rate by 125 basis points since early 2025 (currently holding at 5.25%). To ensure banks actually pass these lower rates to you (for home or car loans), the RBI needs to keep the system flush with cash.+1
- Maintaining Core Liquidity: Economists from IDFC First Bank and Emkay Global suggest the RBI must maintain a core liquidity surplus of at least 1% of NDTL (Net Demand and Time Liabilities). Without an infusion, this surplus could vanish by early 2027.
The Tools the RBI Will Use
The central bank isn’t just “printing money”; it uses sophisticated market instruments to manage this liquidity:
| Tool | Expected Usage in FY27 |
| Open Market Operations (OMO) | Main Driver: The RBI is expected to purchase roughly ₹5 lakh crore in government bonds directly from the market. |
| FX Swaps | Used to manage “rupee liquidity” while also stabilizing the exchange rate (currently around ₹90.6/USD). |
| VRR (Variable Rate Repo) | Used for short-term “top-ups” when the banking system faces temporary dry spells. |
The “FY26” Context
The RBI is already in “infusion mode.” So far in the current fiscal year (FY26):
- It has purchased nearly 47% of the government’s total bond issuances.
- Total OMO purchases reached a record ₹6.88 lakh crore as of mid-February 2026.
- It recently executed a $10 billion (₹2 lakh crore) liquidity measure in January/February 2026 to stabilize the markets post-budget.
“The RBI will have to be the bond demand-supply balancing factor… we expect OMOs of about ₹5 lakh crore in FY27.” — Madhavi Arora, Chief Economist, Emkay Global.
