As of April 6, 2026, India's banking system is in a liquidity surplus of ₹3.8 trillion (approximately $46 billion USD), which represents about 1.5% of banks’ net demand and time liabilities (NDTL). However, this surplus conceals deeper funding stress, as short-term rates have surged and deposit growth lags behind credit growth. The Reserve Bank of India (RBI) has undertaken unprecedented liquidity injections totaling ₹19.7 trillion (around $238 billion USD) over the past 16 months to maintain stability. Notably, the RBI's efforts included outright government bond purchases and reductions in the cash reserve ratio, yet the banking system continues to face challenges due to elevated currency withdrawals and net dollar capital outflows. These pressures have led to increased funding costs, with three-month certificate of deposit rates rising from 5.8% to over 7.55% within months. To alleviate this stress, a reduction in credit demand or a drawdown of government cash balances could help, but the most significant factor remains the return of foreign capital. Without improved capital inflows, the RBI may need to continue its liquidity support into the next fiscal year to avoid further tightening of financial conditions.