RBI's liquidity test may set future course

Ways to deal with FCNR liquidity deluge

For both RBI and banks, there are interesting possibilities and implications

RBI's liquidity test may set future course

The Reserve Bank of India is currently grappling with a notable liquidity dilemma due to a surge in FCNR(B) scheme inflows. To navigate this, a pivotal variable rate reverse repo auction is set to influence the liquidity management strategy. The central bank may also utilize measures such as dollar swaps and bond sales.

RBI VRRR Auction: Managing Surplus Liquidity from Record FCNR B Deposits

RBI uses VRRR auctions to manage surplus liquidity caused by 127 billion dollar FCNR(B) inflows and maintain interest rate stability.