Mumbai: Surplus liquidity in India’s banking system has climbed to a record ₹9.71 lakh crore, supported by strong inflows under the Reserve Bank of India’s FCNR(B) scheme and government spending.
According to RBI data, systemic surplus liquidity stood at ₹9.71 lakh crore as of September 2. This surpassed the previous high of ₹9.21 lakh crore recorded on September 5, 2021.
Forex Measures Bring In $136.38 Billion
The RBI’s special foreign exchange measures mobilised $136.38 billion by August 31.
Of the total, $127.23 billion came through Foreign Currency Non-Resident (Bank), or FCNR(B), deposits. Another $5.26 billion was raised through OFCBs, while external commercial borrowings contributed $3.89 billion.
The FCNR(B) window was closed on August 31, a month ahead of schedule, following a strong response.
However, the ECB and OFCB facilities will remain available until December 31, with further inflows expected through these routes.
Foreign currency brought into the banking system and subsequent swaps with the RBI provided additional rupee liquidity to banks.
Month-end government expenditure, including salary and pension payments, also contributed to the sharp increase in surplus funds.
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RBI Steps Up Liquidity Operations
The record surplus has increased attention on the RBI’s liquidity management measures.
Apart from variable rate reverse repo (VRRR) auctions, other measures such as an incremental cash reserve ratio, open market sales and the Market Stabilisation Scheme could be considered to absorb excess liquidity.
According to a Bank of Baroda Research report, the RBI announced VRRR operations worth a cumulative ₹53.5 lakh crore between August 6 and September 2.
Banks, however, have shown a preference for shorter-duration operations amid strong credit demand.
The RBI on Thursday announced another three-day VRRR auction for September 4, with a notified amount of ₹7 lakh crore.
The central bank said the decision to conduct the auction was taken after reviewing current and evolving liquidity conditions.
