{
  "id": 5312432,
  "title": "How India's RBI could tackle a liquidity deluge triggered by dollar deposits",
  "url": "https://urgent.news/2026/09/03/how-indias-rbi-could-tackle-a-liquidity-deluge-triggered-by-dollar",
  "topic": "business",
  "section": "Business",
  "published": "2026-09-03T11:01:26.000Z",
  "source": {
    "name": "Business Recorder",
    "slug": "business-recorder",
    "url": "https://www.brecorder.com/news/40437769/how-indias-rbi-could-tackle-a-liquidity-deluge-triggered-by-dollar-deposits"
  },
  "original_language": "en",
  "account": "The Reserve Bank of India (RBI) recently handled an unprecedented inflow of $127.23 billion in dollar deposits, resulting in a record high liquidity surplus of 9.70 trillion rupees ($102.70 billion). To manage this surplus, the central bank has considered various options.\n\nOne potential solution is to implement longer-term variable rate reverse repo (VRRR) auctions, allowing banks the flexibility to reverse their positions early. This approach, which was successful in the beginning of the year, could benefit all parties involved.\n\nAnother option is to use shorter tenor dollar-rupee sell-buy swaps. By selling dollars or taking delivery of a portion of its forward positions, the RBI could drain rupee liquidity. The central bank might consider taking delivery of approximately $32 billion from its forward book, which matures in one year, according to Madhavi Arora, an economist at Emkay Global.\n\nThe RBI and the government could also revive a market stabilisation scheme, last used in 2017. This scheme involves the government selling shorter-term Treasury bills, which could absorb surplus liquidity for up to a year. However, the government typically avoids this tool due to the interest payments required.\n\nRaising the cash reserve ratio (CRR), the proportion of deposits banks must hold as reserves, is another tool at the central bank's disposal. Currently at 3%, a temporary increase in CRR, particularly for discounted window deposits, could withdraw significant liquidity from the system. A 50 basis point hike could remove around 1.4 trillion rupees, while a 100 basis point increase could extract approximately 2.8 trillion rupees.\n\nFinally, the RBI could sell government bonds held by investors to withdraw liquidity, although this move could also increase bond yields. Most bond sales are expected to focus on the three-year to 10-year segment, based on estimates from Upasna Bhardwaj, the chief economist at Kotak Mahindra Bank.",
  "summary": "MUMBAI: The Reserve Bank of India’s special dollar deposit scheme drew a larger-than-expected $127.23 billion, leaving the central bank having to deal with a problem of plenty. The dollar deposits, swapped by banks directly with the RBI, have pushed the liquidity surplus in India’s banking system to a record high of 9.70 trillion rupees ($102.70 billion). Traders are debating how the central bank…",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}