With reference to banking system liquidity and yields, consider the following statements: 1. The daily average banking system liquidity surplus in October was ₹7.7 lakh crore. 2. The 364-day T-bill yields reached 6.69% according to RBI data. 3. Banking system liquidity surplus increased significantly from September to October. Which of the statements given above is/are correct?

Certificate of Deposit rates rise as liquidity drops to ₹2.3 lakh crore surplus

GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims· 3 November 2026

Liquidity and money market instruments: a GS3 core concept on monetary policy transmission.

Why in news

RBI data revealed a sharp drop in banking system liquidity to a daily average surplus of ₹2.3 lakh crore in October, leading to a rise in Certificate of Deposit (CD) rates.

Background

Banking system liquidity fell from a daily average surplus of ₹7.7 lakh crore in September to ₹2.3 lakh crore in October. 364-day T-bill yields reached 6.69% according to RBI data.

Facts for Prelims

FactBanking system liquidity surplus: ₹2.3 lakh crore (October average)
FactBanking system liquidity surplus: ₹7.7 lakh crore (September average)
Fact364-day T-bill yields: 6.69%
BodyRBI: Responsible for monitoring and reporting banking system liquidity and T-bill yields

Prelims practice question

With reference to banking system liquidity and yields, consider the following statements:

The daily average banking system liquidity surplus in October was ₹7.7 lakh crore.
The 364-day T-bill yields reached 6.69% according to RBI data.
Banking system liquidity surplus increased significantly from September to October.

Which of the statements given above is/are correct?

(a)2 only
(b)1 and 2 only
(c)1 and 3 only
(d)1, 2 and 3

Show answer

Answer: (a) 2 only — Statement 2 is correct. Statement 1 is incorrect: The October average was ₹2.3 lakh crore. Statement 3 is incorrect: Liquidity fell from ₹7.7 lakh crore in September to ₹2.3 lakh crore in October.

For Mains

Q. Analyze how fluctuations in systemic liquidity influence short-term money market instruments and their subsequent impact on the broader banking sector's lending capacity.

Dimensions to cover in your answer

Liquidity-Rate Correlation: Inverse relationship between surplus liquidity and Certificate of Deposit yields
Monetary Transmission: Impact of T-bill yield movements on commercial bank borrowing costs
Systemic Risk: Potential for credit contraction during periods of acute liquidity squeeze

Keywords: Liquidity Squeeze · Certificate of Deposit · T-bill Yields · Monetary Policy · Money Market

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