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Informist, Wednesday, Oct. 7, 2026

 

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--RBI Malhotra: Surplus liquidity post FCNR(B) deposits to get drained soon 
--RBI Malhotra: FCNR(B) deposits inflows show strong India econ fundamentals
--RBI Malhotra: Expect large amount of FCNR(B) liquidity to be used by yr-end
--RBI Malhotra: Don't expect liquidity to remain in high surplus for long
--RBI Malhotra On use of CRR: "I don't want to rule out anything"
--RBI Malhotra: No liquidity draining measures off the table

 

MUMBAI – With the liquidity in the banking system rising to an average daily surplus of INR 5.90 trillion since Aug. 5 and market participants expecting permanent liquidity-draining measures such as an increase in the cash reserve ratio, Governor Sanjay Malhotra said no liquidity-draining measures are off the table. "I don't want to rule out anything because it's still an evolving and uncertain world," Malhotra told the media at the post-policy press conference.

 

Answering a question about whether there would be an increase in the cash reserve ratio, Malhotra said: "I did mention to you that this (hike in cash reserve ratio) is something which will be one of our least preferred modes of taking out liquidity. ...when you talk about cheaper cost to the Reserve Bank, I think we need to look at the cost to the economy and the benefits to the economy."

 

The banking system liquidity surplus rose to a record high of INR 13.94 trillion on Sept. 15 due to inflows through foreign currency non-resident (banks) deposits. Between Jun. 8 and Aug. 31, total FCNR(B) deposits mobilised under the RBI's special swap window were $132.98 billion.

 

Commenting on the ample liquidity surplus in the banking system, Malhotra said he expects large amounts of FCNR(B) liquidity to be used by the end of this year. He does not expect the liquidity surplus to remain high for long.

 

Malhotra said inflows through the FCNR(B) deposit scheme show that the Indian economy is strong. "It speaks about the strength of the macroeconomic fundamentals of India, that in such a short time and in such a large quantity, we have collected these deposits of $135 billion." He added: "These FCNR(B) deposits also raise some questions on costs to the Reserve Bank. That is not our primary motive."

 

Earlier in the day Malhotra said the central bank will continue to use an appropriate mix of liquidity management tools and strive to align the weighted average call rate with the policy repo rate. The Monetary Policy Committee raised the policy repo rate for the first time in over three years by 25 basis points to 5.50%. It also decided to change the stance to "calibrated tightening" from "neutral".  End

 

Reported by J. Navya Sruthi

Edited by Rajeev Pai

 

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