RBI Governor Says Record $127 Billion Forex Inflows Will Boost Revenue

The Reserve Bank of India (RBI) has dismissed concerns that its record foreign currency deposit mobilisation exercise could create a financial burden, saying the inflows will instead help generate additional revenue for the central bank.

RBI Governor Sanjay Malhotra said the dollars raised through the scheme would be invested in overseas government securities, allowing the central bank to earn interest income.

“Net, net, it will only result in additional revenues, additional income” for the central bank because the dollars can be invested in government securities abroad to earn interest, Malhotra told CNBC-TV18.

RBI manages surplus liquidity after record inflows

The comments come as the central bank manages the impact of a sharp increase in foreign exchange inflows, which has pushed liquidity levels in the banking system higher.

The additional rupee liquidity created through currency swaps has raised concerns that lower borrowing costs could affect monetary policy objectives.

Malhotra said the RBI has several options to absorb excess liquidity, including open market operations and currency swaps.

“We are alert to that. We have enough tools, we have tools like Open Markets Operations, swaps as necessary to withdraw surplus,” he said. “Nothing is off the table,” the governor added.

The RBI received around $127 billion through foreign currency deposits from overseas Indians, exceeding market expectations. The overall fundraising through related measures crossed $136 billion by August.

RBI highlights strong economic growth

Malhotra also said India’s economy has shown resilience despite recent challenges. He noted that private consumption, investment and exports supported growth momentum during the first quarter.

“The Indian economy has weathered this shock really well,” Malhotra said.

India’s gross domestic product expanded 7.8% during the April-June quarter, surpassing expectations. The upcoming festive season, which includes Diwali celebrations, is also expected to support consumption and further strengthen economic activity.