India’s central bank withdraws over six trillion rupees of bank liquidity after record spike
The surplus hits 11.6 trillion rupees on Sep 6, amounting to nearly 4% of the banking system deposits
The Reserve Bank of India (RBI) withdrew more than six trillion rupees (US$63.5 billion) from the banking system on September 7, following a record liquidity surge. The central bank had aimed to remove seven trillion rupees through a 30-day operation, but technical glitches led to weak participation. Despite the issues, all bids were successfully processed through the RBI's e-Kuber system.
The Reserve Bank of India (RBI) had received offers worth 3.53 trillion rupees in an overnight auction, following banks parking 2.59 trillion rupees through a 30-day auction. Large liquidity surpluses, if sustained, could raise inflation and boost financial assets. The RBI has hinted at potential rate hikes as inflation and growth firm up.
Treasury officials suggest another long-duration reverse repo may occur later in the week. India's banking system liquidity surplus reached 11.6 trillion rupees on September 6, or nearly 4% of banking system deposits. The surplus follows US$136 billion received from special one-off schemes aimed at boosting the country's external balances. The RBI's total liquidity withdrawals have exceeded 8.5 trillion rupees.
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