Protection, not aspiration.

"In a role reversal, the Reserve Bank of India (RBI) announced...a variable rate reverse repo (VRRR) auction, a measure through which the regulator sucks out excess liquidity from the system." "Since January, the RBI has injected Rs 9.5 trillion into the banking system," so that "The liquidity surplus averaged Rs 2.76 trillion in the month of June." FE. The RBI has cut its policy rate by a cumulative 100 basis points, from 6.5% to 5.5%, this year. This move has reduced interest on loans as well as deposits, which has created a mismatch between credit and deposits. Mint. Banks cannot increase lending unless it has deposits so the RBI is to cut the Cash Reserve Ratio, which is the portion of deposits that a bank must retain with the RBI  (cleartax.in), by a total of 100 basis points, from 4% to 3%, starting in September (ET). This is supposed to add Rs 2.5 trillion liquidity into the banking system. If there is so much excess liquidity in banks that the RBI has to reduce it by Rs 1 trillion now, then why increase it again starting in September? While, "The share of household term deposits...has decreased to 45.77% at the end of 2025 financial year, down from 50.54% in 2020," "the number of mutual funds accounts have surged" with, retail investors holding 91% of 230 million mutual funds folios as of April 2025, and assets under management (AUM) have tripled to Rs 69.50 trillion from Rs 22.26 trillion at the end of FY20. India Today. A relatively low interest rate penalises savers and forces them to invest in risky assets, such as the investments in subprime assets in the US in 2003-2004. Federal Reserve Bank of St Louis. At 18.1% of GDP, net household savings are the lowest since FY17, while "Financial liabilities, due to higher debt, have risen to 6.2% in FY24, compared to 3.2% in FY14. NDTV. "The revival in household demand across India remains fragile as high levels of debt and weak income continue to pose serious challenges, according to a recent report by Systematix Research." "In urban areas, consumer sentiment remains low, affected by weak job conditions and high prices." ANI. "Fueled by smartphone penetration, fintech innovation, and the promise of 'frictionless' borrowing, millions of young Indians are swiping their way into EMIs, micro-loans, and Buy-Now-Pay-Later (BNPL) schemes without a second thought. But this revolution comes with a dark underbelly - one filled with hidden interest rates, app-based harassment, spiraling debt cycles, and long-perm financial damage." Mint. So why the "jumbo rate cut" of 50 basis points by the RBI, when the economy grew by a whopping 7.4% in January to March 2025 (Reuters)? RBI Governor Sanjay Malhotra said that the growth was lower than the RBI's "aspirations" amid a challenging backdrop of global uncertainty. Reuters. Is the RBI expected to have "aspirations" when it is not an individual, a business or a political party? Although the Consumer Price Index (CPI) inflation fell to 2.8% in May 2025, core inflation has been above 4% for four consecutive months. The Hindu. The RBI should aim for protection. Not delusion of aspiration.