Hopes are rising RBI could further remove emergency cash-tightening measures set over the summer as the rupee stabilises.
RBI has already cut short-term interest rates to near levels before its emergency measures in mid-July, and will end its support to banks raising funds from abroad via foreign currency non-resident facilities and Tier 1 funds on November 30.
Analysts say the RBI could soon raise the amount banks can borrow from its liquidity adjustment facility (LAF) or the term repo facilities by relaxing the cap on borrowing up to 0.5% of deposits.
This would help move the operative rate back to the repo rate.
Cash in the banking system has improved with the overnight call rate dropping to the repo rate of 7.75% from the emergency marginal standing facility rate which stands at 8.75%.
"It is reasonable to expect the return of normalcy in the money markets as the rupee seems to have stabilised and the FCNRB and Tier 1 window would have attracted more than $30 billion," said Sandeep Bagla, associate vice president at ICICI Securities Primary Dealership.
However, a move to fully remove the cap on LAF borrowing is unlikely to come soon given some RBI officials are seen reluctant to return to the era of easy money for banks.