Centre Sees No Cost Pain for RBI on Dollar Deluge
4 Articles
4 Articles
Dollar deluge from FCNR push to test RBI's liquidity drain toolkit
RBI’s dollar mobilization drive has far exceeded expectations, drawing $136.4 billion. But the inflows have also sloshed the banking system with liquidity, leaving the central bank with a problem of plenty, and no easy way to drain it without other costs.
RBI faces about $11 billion bill on foreign deposits plan
India's central bank secured record diaspora funds, exceeding projections significantly. This fundraising effort may incur substantial costs for the Reserve Bank of India. The RBI agreed to shield banks from currency risks on these foreign deposits. These operations could cost up to 1.2 trillion rupees over five years. The central bank aims to manage these fiscal implications through careful investment strategies.
The Reserve Bank of India expects that due to the huge flow of foreign currency, the cost will be very low. Hedging expenses are expected to be removed due to the high interest rates received on the US Treasury.
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