The Reserve Bank of India is expected to inject additional liquidity into the financial system during February and March to anchor rising short-term borrowing costs, as market participants anticipate continued pressure on commercial paper and certificate of deposit rates. Despite the central bank's injection of ₹3.00 lakh crore in December and January, short-term rates have continued to climb amid persistent liquidity constraints.

Sharp Rise in Short-Term Rates

Commercial paper and certificate of deposit rates have experienced significant increases over recent months, reflecting the tight liquidity conditions in the banking system. The data reveals substantial rate movements across key short-term instruments.

"Short-term rates are more affected by the liquidity situation in the system. CD rates have gone up in the recent past and are trading with an upward bias as liquidity is tight. I think the RBI will bring in more liquidity support in February and March," said Alok Singh, head of treasury at CSB Bank of India .

System Liquidity Under Pressure

System liquidity has remained constrained since mid-December due to multiple factors impacting money market conditions. The liquidity situation shifted from surplus to deficit in the second half of December, with current conditions showing only a tight surplus of ₹43,421.00 crore on average in January.

Key factors contributing to liquidity pressure include:

• Subdued government spending patterns
• Sustained foreign exchange market intervention by RBI
• Increased credit demand from banking sector
• Competition for deposits amid strong credit growth

"Demand for CDs and CPs has increased because liquidity was tight in the second half of December, and it is still tight even now. In addition, credit growth is good, while there is a race for deposits," explained Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank.

Credit-Deposit Dynamics

The banking sector's credit and deposit growth patterns have contributed to the current liquidity scenario, with credit expansion outpacing deposit mobilization. This divergence has pushed the credit-deposit ratio to unprecedented levels.

Market Outlook and Policy Response

Market participants anticipate that the Reserve Bank of India will need to implement additional liquidity infusion measures, including open market operations, over the next two to three months to prevent deficit conditions from persisting. The pressure on certificate of deposit rates has intensified over the past fortnight, with implications for the broader yield curve.

"If the demand for CDs keeps increasing, then the shorter end of the yield curve (one- to five-year yields) is going to be affected. The pressure on CDs has come up in the last fortnight or so, and with low deposits and tight liquidity, this race for deposits will intensify," noted a senior bond trader with a primary dealership.

"More liquidity infusion measures including open market operations will be required in the next two-three months, or deficit conditions will persist," Pawar added, highlighting the ongoing challenges facing the monetary policy framework in managing system liquidity effectively.

Bank customers planning their financial activities today need to be aware that banks across India remain closed on January 10, 2026. This closure follows the Reserve Bank of India's established guidelines for weekend operations, which specify that banks must remain closed on the second and fourth Saturdays of each month.

RBI Weekend Holiday Guidelines

The Reserve Bank of India provides an annual holiday calendar that outlines all dates when banks will remain closed throughout the year. According to RBI guidelines, banks operate on a structured weekend schedule where they remain open on the first and third Saturdays of each month, unless these dates coincide with other holidays mentioned in the official calendar.

Major Bank Holidays in January 2026

January 2026 features an extensive list of bank holidays covering various regional and national celebrations. These holidays reflect India's diverse cultural and religious landscape, with different states observing specific festivals according to local traditions.

February 2026 Bank Holiday Schedule

February 2026 continues with significant religious observances that will affect banking operations across various states. The month includes major festivals celebrated nationwide as well as regular weekend closures.

Key holidays for February 2026 include:

• Guru Ravidas Jayanti
• Maha Shivaratri
• Regular Saturday closures on February 14 and 28
• Sunday closures on February 1 and 15

Market Performance Context

While banks remain closed for regular operations, financial markets experienced significant volatility recently. The Sensex crashed nearly 800 points, representing a 1% decline to an intraday low of 83,402 on Friday. Similarly, the Nifty 50 registered a 1% drop, reaching an intraday low of 25,623.

Both indices extended losses for the fifth consecutive session on January 9, driven by concerns over foreign capital outflow, geopolitical tensions, and caution ahead of Q3 earnings announcements. Over the last five sessions, the Sensex declined by 2.5% (approximately 2,186 points), while the Nifty 50 fell by 2.5% as investors moved away from riskier equity investments.