RBI meets banks as liquidity hits a record surplus
Swap inflows of $136.4 billion left overnight rates below 5%.
The Reserve Bank of India met top lenders on Thursday to talk through a liquidity glut that has pushed overnight borrowing costs well below the policy rate.
Banking system surplus hit a record Rs 9.70 lakh crore on Wednesday, above the previous high of Rs 9.21 lakh crore in September 2021. The surge followed the RBI's special foreign-exchange swap windows, which drew a larger-than-expected $136.4 billion. FCNR(B) deposits did most of the work.
The weighted average call rate fell to 4.96% on Thursday, below 5% for the first time in five months, according to CCIL data. One-month certificate of deposit rates also eased. Between August 6 and September 2, the RBI had already announced VRRR auctions totalling Rs 53.5 lakh crore to soak up cash.
Lenders at the meeting floated foreign-exchange sell-buy swaps as one way to drain rupee liquidity gradually, Reuters reported, citing people familiar with the talks. Analysts are listing VRRR, cash management bills, OMOs, MSS bonds, and a possible temporary CRR hike among the tools still on the table.
India wanted dollars. It got them in volume, and the rupee side of the trade is now the headache.
Cheap overnight money can help credit growth into the festive season, and some brokerages have already lifted FY27 loan-growth forecasts. But banks also warn that FCNR funding can squeeze margins in the near term, and the RBI's growing forward dollar liabilities may limit how freely it can use the forex market to mop up.
Watch which absorption tools the RBI reaches for first, and whether durable liquidity keeps climbing toward the Rs 12 lakh crore peak some banks expect this month. The bunched maturities on three- and five-year deposits are the later problem.