India’s Economic Survey backs RBI policy, flags strong liquidity transmission
India’s Economic Survey for 2025–26 on Thursday endorsed the Reserve Bank of India’s monetary policy stance, saying proactive liquidity management helped support credit growth and financial stability amid global uncertaint
The Survey underlined the importance of strengthening innovative and inclusive domestic financing channels to cushion the economy from volatility in global capital flo
It noted that the RBI remained nimble in managing liquidity through the year, ensuring adequate funds in the banking system. This helped improve transmission to money and credit markets, enabling banks to meet productive credit demand. Transmission to lending and deposit rates of scheduled commercial banks remained strong amid surplus liquidity condition
The Survey also highlighted the RBI’s regulatory framework issued in May 2025, which it described as a significant shift towards transparent, consultative and impact-based regulation. The framework, it said, reflects India’s attempt to balance macroeconomic objectives with broader social and developmental goal
According to the Survey, the quality of financial sector regulation has emerged as a key factor in economic resilience and sustained growth. By maintaining price stability, supporting financial stability and promoting inclusive growth, monetary policy continues to act as a facilitator of long-term economic development.
In response to easing inflationary pressures, the RBI’s Monetary Policy Committee reduced the repo rate and injected durable liquidity through Cash Reserve Ratio (CRR) cuts and Open Market Operations (OMO). These measures were aimed at improving credit flow, boosting investment and supporting overall economic activit
The easing stance has been transmitted to lending rates, with weighted average lending rates of scheduled commercial banks declining during the year, the Survey noted.
Broad money growth rose to over 12 per cent from around 9 per cent a year earlier, indicating that banks were able to deploy the liquidity released through CRR cuts. The RBI’s OMO purchases further added durable liquidity, resulting in an average surplus of about ₹1.89 lakh crore during FY26 (up to January 8, 2026), as reflected in the Liquidity Adjustment Facility (LAF).
The Survey also pointed to the creation of a dedicated Regulatory Review Cell under the RBI’s new framework. The Cell will review each regulation at least once every five to seven years, signalling a shift from reactive rule-making to a more anticipatory regulatory approach aligned with global best practices.
(IANS)
