RBI Expected to Boost Liquidity to Manage Short-Term Interest Rates

India's central bank, the Reserve Bank of India (RBI), is expected to increase liquidity before the fiscal year-end to prevent short-term interest rates from rising sharply. This move aims to counterbalance the liquidity tightening caused by RBI's interventions in the currency market to support the rupee amid the Iran war. The RBI has used tools like open market operations and dollar-rupee swaps to maintain system liquidity and keep call money rates near the lower end of the liquidity adjustment facility corridor, with the policy repo rate currently at 5.25%. Economists note that RBI has preferred liquidity measures over policy rate changes during this period of uncertainty.