RBI’s $136bn FCNR Inflows Flood Banks, Spiking Liquidity
· Business · LiveMint, Economic Times
The RBI’s dollar mobilisation scheme, launched in early June, attracted $136.4 billion by 31 August, with more than 90% coming from foreign currency non‑resident (bank) deposits. The inflows lifted the system liquidity surplus from about ₹2.05 trillion at launch to ₹10.54 trillion on 3 September, according to Bloomberg figures. India’s foreign exchange reserves grew to a record $740.8 billion on 28 August. The excess liquidity could keep short‑term rates lower than desired and may encourage borrowing that could fuel inflation, prompting the RBI to consider additional tools to absorb the surplus without harming bond markets or bank profitability.
Why it matters
Banks may face pressure on profitability from a surplus liquidity pool that can push rates down, while the RBI must manage potential inflationary and market‑impact risks arising from prolonged excess liquidity.
Read the original report — LiveMint
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