Reserve Bank of India Governor Sanjay Malhotra has said the central bank is prepared to use measures such as government-bond sales and foreign-exchange swaps to absorb excess liquidity from India’s banking system.
Banking-system liquidity has reportedly remained above ₹10 trillion following a major inflow of foreign currency. Banks mobilized approximately US$127 billion through an RBI-supported programme involving Foreign Currency Non-Resident, or FCNR(B), deposits.
The inflows strengthened India’s foreign-exchange position but also released a substantial amount of rupee liquidity into the banking system. The RBI is considering different tools to prevent overnight market rates from remaining significantly below its policy rate.
Malhotra also indicated that the central bank does not intend to impose an additional cash reserve ratio on the overseas deposits. That clarification is relevant to banks participating in the programme.
The measures under consideration concern transactions between the RBI and financial institutions. They do not freeze NRI accounts, reduce individual deposit balances or impose a new payment requirement on overseas Indians.
