The central bank used overnight and 30-day operations after the banking-system surplus rose to ₹11.6 trillion.
MUMBAI:
The Reserve Bank of India absorbed more than ₹6 trillion from the banking system on Monday, seeking to manage a record liquidity surplus created partly by unusually large foreign-currency inflows.
Banks placed ₹3.53 trillion with the RBI through an overnight operation after parking ₹2.59 trillion in a 30-day auction. The central bank had offered to absorb as much as ₹7 trillion through the longer operation, but demand fell substantially short.
Five traders told Reuters that technical problems affected participation in the 30-day auction. A person familiar with the system disputed that account, saying bids were processed through the RBI’s e-Kuber platform. The central bank did not respond to Reuters’ request for comment; the existence of a technical malfunction therefore remains contested.
Banking-system liquidity reached a surplus of ₹11.6 trillion on September 6, equivalent to nearly four per cent of deposits, following approximately $136 billion in receipts under special external-balance schemes.
Large, persistent surpluses can weaken the transmission of monetary policy, elevate asset prices and add to inflationary pressure. The RBI’s liquidity withdrawals have exceeded ₹8.5 trillion, although funds absorbed through reverse-repurchase operations return when those transactions mature.
Economists expect the RBI may need a broader combination of longer-term reverse repos, market-stabilisation bonds and foreign-exchange swaps. Further action will depend on how quickly the surplus declines and whether banks participate in longer-duration facilities.
