Why RBI is draining excess liquidity but also injecting funds
Reserve Bank of India has significantly reduced banking system liquidity from a peak surplus in a short time. Liquidity surged after banks received funds from overseas Indians under the FCNR(B) scheme. The central bank utilized reverse repo auctions and cash reserve ratio adjustments to absorb this surplus effectively. As overnight rates increased following these liquidity measures,...
Key Takeaways
- Reserve Bank of India has significantly reduced banking system liquidity from a peak surplus in a short time.
- Liquidity surged after banks received funds from overseas Indians under the FCNR(B) scheme.
- The central bank utilized reverse repo auctions and cash reserve ratio adjustments to absorb this surplus effectively.
Reserve Bank of India has significantly reduced banking system liquidity from a peak surplus in a short time. Liquidity surged after banks received funds from overseas Indians under the FCNR(B) scheme. The central bank utilized reverse repo auctions and cash reserve ratio adjustments to absorb this surplus effectively. As overnight rates increased following these liquidity measures, RBI temporarily infused funds to manage sharp rate rises.
Original Publisher Attribution
This summary was curated from Economic Times.