Neutral impactEconomy
FCNR rush leaves banks swimming in ₹6.65 lakh crore liquidity
Economic Times 5 hrs ago·1 Sept 2026, 8:00 pm
The Indian banking system is currently experiencing a significant surge in funds, with total liquidity reaching a four-year high of ₹6.65 lakh crore. This influx is largely driven by Foreign Currency Non-Resident (Bank) (FCNR(B)) deposits, which have been repatriated by overseas investors. This abundance of cash has led to a sharp drop in short-term interest rates, with the weighted average call rate falling well below the Reserve Bank of India's repo rate.
For investors, this excess liquidity means banks have ample funds to lend, which can support credit growth. However, it also puts downward pressure on interest rates, potentially reducing the returns on fixed deposits and short-term debt instruments. The central bank is managing this surplus by absorbing funds through its Variable Rate Reverse Repo (VRRR) operations, but experts anticipate that liquidity levels will normalize by December.
Excerpt from Economic Times
FCNR rush leaves banks swimming in ₹6.65 lakh crore liquidity FCNR rush leaves banks swimming in ₹6.65 lakh crore liquidity Banking system liquidity has reached a four-year high as FCNR(B) inflows entered the market. This excess liquidity has pushed the weighted average call rate significantly below the repo rate.…Read the original at Economic Times
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