Banks flush with $133bn diaspora inflow, RBI drains over ₹1tn
India's banks are swimming in cash after a huge $133 billion inflow from the Indian diaspora.
This sudden surge has pushed overnight borrowing rates below the RBI's 5.25% policy rate, just as credit demand and inflation are picking up.
To steady things, the RBI has already drained over ₹1 trillion from the system through bond sales and other measures.
Economists now expect 4 rate hikes
The RBI isn't just fighting inflation: it's also working to keep the rupee stable and help the government borrow smoothly.
It has drained more than 1 trillion rupees through bond sales and other measures.
The cash deluge from the Indian diaspora has sent overnight rates below the RBI's 5.25% policy rate, which could make borrowing cheaper for everyone.
With food and oil prices rising, economists now expect several interest rate hikes ahead, with four over a one-year period compared to three at the end of June, so higher loan costs might stick around for a while.