RBI Buys So Many U.S. Dollars That It Ends Up Supporting Debt Market
- Surplus liquidity in banking system at 5.8 trillion rupees
- Local banks buy 13% more sovereign debt in second quarter
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The Reserve Bank of India has accumulated so many dollars recently that it’s having a knock-on impact on the nation’s sovereign debt market.
The central bank mopped up $30 billion of dollars in the April-June period, the most in more than a decade, leading to a flood of rupees in the financial system. Data from the RBI suggest that local banks are recycling the liquidity into government bonds.