Rupee Gains, Banks Borrow, Surplus Vanishes—The Day That Shifted the Pulse

The Indian rupee opened 0.2% stronger at 85.5050 against the US dollar on June 27, buoyed by easing global oil prices and a softer greenback. This marks a modest recovery from the previous close of 85.7050, reflecting improved sentiment amid global fiscal concerns.

 

Meanwhile, the Reserve Bank of India (RBI) reported that banks’ cash balances stood at ₹9.36 trillion as of June 26, indicating a healthy liquidity buffer. However, the government’s surplus cash balance with the RBI was nil on the same day, suggesting active fiscal deployment or a temporary drawdown in treasury operations.

 

In a sign of tightening liquidity, Indian banks borrowed ₹18.26 billion via the Marginal Standing Facility (MSF) on June 26. This overnight borrowing window, typically used during short-term liquidity crunches, signals rising demand for funds amid month-end pressures.

 

Additionally, the RBI extended ₹70.10 billion in refinance support, likely under export credit or sector-specific liquidity schemes. This move underscores the central bank’s dual strategy—ensuring targeted liquidity while maintaining macroeconomic stability.
 

Together, these developments paint a picture of a central bank walking a tightrope: supporting growth through liquidity infusions while keeping a close eye on inflation and currency stability. With the rupee gaining ground and liquidity dynamics shifting, all eyes are now on the RBI’s next policy cues.

 

Sources: Business Standard, Reserve Bank of India, Reuters