SBI Capital flags RBI’s ‘inconsistency’ in liquidity management

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Ecowrap questions ₹2.5 lakh crore VRR auctions amid efforts to absorb liquidity and signal tight money regime

By Ashokamithran T

Updated - October 23, 2026 at 09:08 PM. | Mumbai

SBI Capital Markets termed RBI’s move to inject liquidity as inconsistent with the monetary policy stance of calibrated tightening, in its Ecowrap report published on October 23, 2026.

The RBI conducted Variable Repo Rate (VRR) auctions to inject ₹2.5 lakh crore in the past week, a move that is seen as opposite to the “calibrated tightening” monetary policy stance stated in the October 2026 monetary policy meeting. In the meeting the RBI Governor Sanjay Malhotra stressed that the RBI would use appropriate measures to absorb liquidity and signalling tight money regime.

The central bank has also been conducting Variable Reverse Repo Rate (VRRR) auctions to suck-in liquidity. The VRR auction comes against this backdrop.

“The Governor has amplified external conditions and financial stability and less amplified liquidity and transmission as compared to August policy. This clearly shows that RBI is cognizant more of threat to external stability arising from widening geopolitical conflicts even as a rate hike was resorted to with inflation concerns taking centre stage. We, however, find it a little difficult to understand the reasons behind RBI move to inject liquidity through repo auctions of ₹2.5 lakh crore even as the primary objective is to ensure that the RBI is in a “calibrated tightening” mode and RBI Governor also emphasizing less on liquidity in October policy,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India, who also serves as a member of the Prime Minister’s Economic Advisory Council.

Ghosh said that RBI was giving contradictory signals on the liquidity management front. “While maintaining daily call rates requirements at 99 per cent with regular OMO/ VRRR, RBI has clearly on the path of calibrated liquidity tightening. However, suddenly RBI had done three repo injection from October 19 onwards amounting to ₹2.5 lakh crore which is incoherent in a calibrated tightening mode. This gives a signal to the market that the central bank is still trying to balance multiple conflicting objectives,” said and further asked if RBI moving from “calibrated tightening” to “mildly calibrated tightening.”

Published on October 23, 2026

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