MUMBAI: RBI governor Sanjay Malhotra said inflows from the special FCNR(B) deposit scheme for non-residents will have a temporary and limited impact on liquidity, with surplus conditions expected to ease after peaking around the second quarter.Malhotra said the central bank did not have any target for dollar mobilisation under the scheme, which has seen inflows of over $36 billion in the last three weeks in July , and there was no proposal to either advance its closure or extend it. He said liquidity conditions will remain in surplus only briefly. “liquidity may be in surplus only for the very short term. It may peak around Q2, around September or so, and going forward it should absorb, because of our normal needs of the economy – – through increasing currency in circulation, higher requirement for reserves because of deposit growth. We also have some forwards which are getting matured,” he said.He said the liquidity impact is consistent with the annual infusion undertaken by RBI through open market operations and swap transactions. On the deployment of the dollars exchanged with banks, Malhotra said that it would be decided in the same way as other additions to forex reserves “there is a high-level committee, with members from the government also participating regularly, and we take a call on how to manage the reserves based on three principles of security, liquidity, and returns. But as I mentioned, the liquidity it will inject is there only for a short while — the balance sheet is growing at more or less a normal pace, barring a flood of unexpected deposits,” said Malhotra.
