RBI to drain Rs 1 lakh crore as VRRR auctions fail to absorb liquidity
The Reserve Bank of India is set to drain ₹1 lakh crore from the banking system through bond sales this month. This move comes after Variable Rate Reverse Repo (VRRR) auctions proved insufficient to absorb the significant surplus liquidity. The surplus has been exacerbated by recent dollar inflows, with Governor Sanjay Malhotra confirming that all liquidity management tools remain under consideration. This action follows the RBI partially cancelling a debt sale, signalling its intent to manage rising yields and inflationary pressures.
Why it matters
This indicates the RBI's proactive stance in addressing excess liquidity, which could otherwise fuel inflation and distort short-term rates. For banks, this means higher government bond issuances and potential upward pressure on yields, affecting treasury operations and funding costs. The shift from VRRR to bond sales implies a more durable liquidity absorption strategy.
The Economic Times · Sat, 12 September 2026
Read more →RBI issues draft SOP for temporary debit holds on money-mule, cyber fraud accounts
The Reserve Bank of India has released a draft Standard Operating Procedure (SOP) for banks to implement temporary debit holds on accounts linked to money mules and cyber fraud. This follows a Supreme Court directive from August 4, 2026. The proposed framework outlines specific timelines for banks to identify suspicious transactions, notify customers, examine their explanations, and subsequently remove or extend debit holds. The objective is to standardize the process and enhance the effectiveness of combating financial fraud.
Why it matters
This draft SOP will streamline banks' response to cyber fraud, imposing clear procedural requirements and timelines. It necessitates upgrades in fraud detection systems and customer communication protocols, potentially increasing operational burden but improving consumer protection and reducing financial crime risks. Compliance will be critical to avoid regulatory penalties.
The Hindu BusinessLine · Sat, 12 September 2026
Read more →Bank deposits grow 17.8% in August, fastest in decade as FCNR-B inflows mask local mobilisation woes
Bank deposits grew 17.8% year-on-year at the end of August, marking the fastest pace in a decade. This surge is predominantly attributed to the special FCNR(B) deposits facilitated by the RBI, which brought in significant dollar inflows. In contrast, credit growth eased slightly to 19.1%. Despite the overall deposit growth, banks continue to face challenges in mobilizing domestic savings, indicating a structural issue underneath the FCNR(B)-driven boost.
Why it matters
While the FCNR(B) scheme has provided a temporary reprieve by bolstering deposit bases, the underlying challenge of domestic deposit mobilization persists. Banks leveraging these inflows can support credit growth in the short term, but will need to focus on sustainable domestic deposit strategies as FCNR(B) effects moderate.
The Economic Times · Sat, 12 September 2026
Read more →SBI’s ERD expects 25 bps repo rate hike each in Oct and Dec due to hardening crude oil prices, CPI inflation
SBI's Economic Research Department (ERD) anticipates two 25 basis point repo rate hikes, one each in October and December. This projection stems from hardening crude oil prices and incipient signs of generalization in CPI inflation. The ERD also highlighted global bond yields inching past decadal highs as a contributing factor. This forecast suggests sustained inflationary pressures domestically and globally are likely to influence the RBI's monetary policy decisions.
Why it matters
A repo rate hike would increase borrowing costs for banks, potentially translating to higher lending rates for consumers and businesses. This could impact credit demand and economic growth. Bond markets would react with further yield increases, affecting valuations and treasury portfolios.
The Hindu BusinessLine · Sat, 12 September 2026
Read more →SBI developing solution to use UPI data for checking creditworthiness of small biz
State Bank of India is developing a solution leveraging UPI transaction data to assess the creditworthiness of small businesses. This initiative aims to facilitate digital loans for these entities, specifically targeting those that may not have GST registration. The bank anticipates providing digital loans within a single day for eligible borrowers, using UPI transactions as a proxy for sales data. This approach is intended to integrate more small businesses into the formal financial sector.
Why it matters
This innovation by SBI could significantly expand credit access for MSMEs, particularly those in the informal sector. By using UPI data, banks can overcome traditional hurdles like lack of documented financial history, leading to faster loan approvals and a more inclusive credit ecosystem. It highlights the growing utility of digital payment data in financial services.
The Economic Times · Sat, 12 September 2026
Read more →Reserve Bank of India (Priority Sector Lending – Targets and Classification) Third Amendment Directions, 2026
The RBI issued its Third Amendment Directions for Priority Sector Lending (PSL), modifying rules concerning the exclusion of certain advances from Adjusted Net Bank Credit (ANBC). Specifically, the end date for exempting advances against fresh FCNR(B) and NRE term deposits has been revised from September 30, 2026, to August 31, 2026. This amendment clarifies that these exclusions are tied to deposits qualifying for CRR and SLR exemptions, impacting how banks calculate their PSL targets and ANBC.
Why it matters
This adjustment means banks have a shorter window for certain FCNR(B) and NRE deposit-backed advances to be excluded from ANBC for PSL calculation. Banks must recalibrate their PSL strategies and ANBC calculations to reflect this earlier cutoff, which could slightly increase their effective PSL requirement depending on their portfolio mix.
RBI Notifications · Sat, 12 September 2026
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