RBI uses currency swaps to cut $115 billion cash surplus
India's central bank is draining excess cash from banks using currency swaps. This action follows record high funds in the financial system. The Reserve Bank of India sells dollars for rupees, reducing rupee liquidity. Massive inflows had previously pushed surplus funds to 11 trillion rupees. These measures aim to manage inflation risks posed by cheaper borrowing.
India's central bank, the Reserve Bank of India (RBI), utilized currency swaps to remove an excess $115 billion in cash from the country's banking system, according to sources familiar with the matter. The cash surplus, which rose to a record level following massive inflows, had been causing concerns for the RBI as cheaper borrowing could potentially fuel inflation risks.
To tackle this issue, the RBI engaged in short-term sell-buy foreign-exchange swaps in the market, with some of these transactions set to expire in October. While the exact size of the swap deal remains undisclosed, the RBI has not provided many details about the matter, and a spokesperson declined to comment on the issue.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
