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RBI liquidity boost falters due to FX intervention absorbing flow
RBI’s CRR cut impact muted as FX intervention absorbs much of intended liquidity flow into banking system.
The Reserve Bank of India’s attempt to inject liquidity via a phased CRR cut has underperformed, with only ~₹1.25 trillion released out of the targeted ₹2.5 trillion. FX market interventions and forward contract maturities have largely absorbed the intended flow. Analysts warn the banking system may slip into deficit without fresh open market operations. The central bank’s intervention to support the rupee has muted its monetary easing impact. Source: Reuters