Halister News

(Bloomberg) -- Non-resident deposit outflows will depress INR and rupee liquidity only if withdrawals exceed $15b, BofAML economists including Indranil Sen Gupta write in note.

• RBI is largely covered, as it had $23.9b of short-term long forward dollar positions on its books as of end-July
• Banks may be unable to deliver more than $15b; nostro balances amount to $30.2b, but banks need to maintain $10b- $15b of working FX balances and $5b for Iran oil payments
• INR may weaken if withdrawals exceed $15b, as Nov. will also see a parallel bunching of bank and corporate FX repayments when INR is seasonally weak
• Rupee liquidity will be tight if RBI has to sell FX; resultant crunch would require RBI to conduct OMO purchases; RBI to OMO a further 1.1t rupees by March assuming $15b of withdrawals
• Related story: New RBI chief Patel faces first test with $20b of outflows lined up