RBI Cash Drain Threatens India Short-Bond Rally as Surplus Liquidity Nears 8 Trillion Rupees
Updated
Updated · Bloomberg · Jun 19
RBI Cash Drain Threatens India Short-Bond Rally as Surplus Liquidity Nears 8 Trillion Rupees
2 articles · Updated · Bloomberg · Jun 19
Summary
India’s short-end bond rally is at risk of fading as analysts expect the Reserve Bank of India to withdraw excess cash from the banking system in coming months.
About 8 trillion rupees in surplus liquidity — near pandemic-era levels — is seen building up, prompting BofA Securities and Bandhan AMC to forecast more short-term liquidity absorption operations.
DBS Bank expects the RBI to use a stronger step in August by raising the share of deposits banks must keep with the central bank.
The warning comes after the rally had been fueled by plans aimed at drawing more foreign capital into India’s bond market.