New Delhi, April 30 -- Mumbai: The Reserve Bank of India's "unprecedented" shopping spree is expected to flood the banking system with surplus liquidity, which would not only allow it extra room to accelerate its monetary policy changes but also force lenders to lower their rates.

RBI's plan to buy additional bonds worth Rs.1.25 trillion and its upcoming Rs.1.5 trillion dividend transfer to the Union government-both in May-are expected to double the surplus liquidity in the system to Rs.5 trillion by the end of June, according to market participants.

Liquidity in the domestic banking system touched a surplus of Rs.2.36 trillion on 28 April, RBI data show. An additional surplus would compel banks to lower lending rates at a time when cre...