As measured by the net position under the LAF, system liquidity stood at an average daily surplus of ₹5.9 lakh crore since the last MPC meeting in August 2026
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Dado Ruvic
RBI Governor Sanjay Malhotra sees the FCNR (B) deposit-related surplus liquidity in the banking system as a temporary phenomenon, with the surplus expected to get drained out within the current financial year.
The Governor also emphasised that raising the cash reserve ratio (CRR) will be one of the least preferred ways of withdrawing liquidity.
He noted that during August and September, system liquidity increased substantially on account of the recent measures undertaken to attract capital inflows. As measured by the net position under the LAF, system liquidity stood at an average daily surplus of ₹5.9 lakh crore since the last MPC meeting in August 2026.
“When you talk about the cheaper cost to the Reserve Bank, I think we need to look at the cost to the economy and the benefits to the economy,“ Malhotra said.
The Governor emphasised that banks should do their due diligence and take their time to use the FCNR-B deposits ($133 billion) mobilised by them between June 8 and August 31 under the RBI’s special foreign currency USD/INR swap window.
Malhotra observed that there is more liquidity today than is required. But he believes that this is not a very long-term phenomenon due to natural reasons like currency leakage, reserve requirements of banks, liquidity draining operations through various central bank operations it is spot, sell-buy swaps, OMO, VRRR etc.
“So, this liquidity will get drained. We do not expect liquidity to remain in such a high surplus for a very long period of time,” he said.
Published on October 7, 2026
