FCNR rush leaves banks swimming in ₹6.65 lakh crore liquidity
Banking system liquidity has reached a four-year high of ₹6.65 lakh crore, primarily driven by substantial FCNR(B) inflows. This surge has pushed the weighted average call rate significantly below the repo rate, indicating abundant funds in the interbank market. To manage this surplus, the RBI has been actively conducting variable rate reverse repo operations, absorbing a significant portion of this liquidity. Treasury heads are showing a preference for shorter tenures in these operations, anticipating a normalization of liquidity conditions.
Why it matters
The influx of FCNR(B) deposits, likely spurred by attractive temporary rates, has created an unusually high liquidity surplus in the banking system. This situation typically leads to lower short-term lending rates among banks and reduces their reliance on RBI's repo window. Banks will need to manage this excess liquidity efficiently, potentially leading to increased investments in government securities or reduced marginal cost of funds.
The Economic Times · Wed, 2 September 2026
Read more →Indian banks slash FCNR deposit rates by up to 310 basis points
Following the closure of the Reserve Bank of India's special swap window, Indian banks have aggressively reduced interest rates on foreign-currency deposits, with cuts up to 310 basis points. The special facility, which lasted for ten weeks, allowed lenders to offer unusually high rates to attract overseas funds. The strong inflows during this period prompted the RBI to advance the closure of the window. With the special window now closed, banks are adjusting their deposit rates to align with market conditions and manage their liquidity positions more cost-effectively.
Why it matters
The rate cuts reflect a recalibration by banks after the expiry of the special RBI swap window, which facilitated FCNR(B) deposit mobilization. This will likely reduce the cost of funds for banks that heavily relied on these deposits. However, it also means a reduced incentive for Non-Resident Indians (NRIs) to place FCNR(B) deposits, potentially slowing future foreign currency inflows through this channel.
The Economic Times · Wed, 2 September 2026
Read more →Festive surge drives UPI near record ₹29.8 lakh crore milestone across 24.5 billion transactions
India's Unified Payments Interface (UPI) achieved new milestones in August, processing a fresh record of 24.51 billion transactions. The total value of these transactions neared ₹29.8 lakh crore. This impressive performance reflects a significant jump from July, bolstered by festive activity and the expanding adoption of digital payments across the nation. Industry experts continue to emphasize the crucial role of resilient digital infrastructure in sustaining this growth trajectory and enhancing financial inclusion.
Why it matters
The continued record-breaking performance of UPI underscores its increasing entrenchment in the Indian economy and its critical role in facilitating cashless transactions. For banks, this signifies sustained growth in digital payment volumes, potentially reducing cash handling costs and driving transaction fee income. However, it also necessitates ongoing investment in robust and scalable digital infrastructure to support ever-increasing loads.
The Economic Times · Wed, 2 September 2026
Read more →Banks seek CRR cut on green deposits to boost green lending in India
Indian banks are advocating for a reduction in the Cash Reserve Ratio (CRR) specifically for green deposits to stimulate climate and transition finance. Current estimates suggest that green deposits have not yet reached the critical mass needed to make a substantial impact. Proponents argue that a decreased CRR would significantly lower funding expenses for banks, thereby unlocking more capital for green loans. This move is deemed essential as India aims for substantial investments to meet its net-zero emissions targets.
Why it matters
A CRR reduction on green deposits would effectively reduce the cost of funds for banks engaging in green lending, incentivizing them to allocate more capital towards environmentally sustainable projects. This policy push could accelerate India's transition finance agenda, aligning banking operations with national climate goals. It also highlights the banking sector's role in driving sustainable development through financial innovation and policy advocacy.
The Economic Times · Wed, 2 September 2026
Read more →Credit card transactions rise 24% in July, while average spend drops 13.5% to ₹3,460: What’s driving the trend?
Credit card transactions witnessed a robust 24.1% year-on-year increase, reaching 601 million in July, yet overall spending grew at a slower pace of 7.4%. This disparity led to a 13.5% decline in the average transaction value, which now stands at ₹3,460. The trend suggests that consumers are increasingly using credit cards for smaller purchases, with a notable surge in the use of RuPay cards linked to UPI. This shift indicates a broader acceptance and integration of credit cards into everyday, smaller-ticket transactions.
Why it matters
The rise in transaction volume despite a fall in average spend points to greater penetration and usage of credit cards for micro-payments, possibly displacing debit card or cash transactions. The increasing preference for RuPay cards linked to UPI for smaller purchases also indicates a growing convergence between credit and real-time payment rails. Banks need to analyze whether this trend impacts revenue per transaction and adapt their credit card product strategies to cater to smaller-ticket usage.
Livemint · Wed, 2 September 2026
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