The Reserve Bank of India absorbs approximately 20 billion dollars of excess rupee liquidity, reducing the banking system’s liquidity surplus by more than half.

(1) Two banking industry sources stated that the Reserve Bank of India recently absorbed approximately 20 billion US dollars of excess Indian rupee liquidity through foreign exchange operations, with USD/INR swaps becoming an important tool for liquidity management. (2) The Reserve Bank of India recovers liquidity through USD/INR sell-buy swaps, spot USD sales, bond sales, and reverse repos, resulting in the surplus liquidity in the banking system dropping by more than half from the record level of 1.116 trillion rupees earlier this month. (3) Gaurav Sengupta, Chief Economist at IDFC First Bank, pointed out that around 18.5 billion US dollars' worth of spot forex sales and swap operations, as well as bond sales by the Reserve Bank of India, are the primary drivers behind the decline in core liquidity. (4) She forecasts that the Reserve Bank of India may further withdraw 150 billion rupees of liquidity through bond sales and forex swaps.