Post-demonetization liquidity drain (2016-2017)
In November 2016, India invalidated 86% of its currency overnight. Banks were flooded with deposits as people returned old notes, creating a huge liquidity surplus. The RBI drained it over the following year, with its last net open-market bond sale in November 2017.
The surplus was absorbed within about a year, and overnight rates returned to the policy corridor.
It set the template for using balance-sheet tools to manage liquidity without touching the policy rate.
Today's sale is the first net open-market sale since that episode, nine years earlier.
