Banking system surplus liquidity stood at around ₹10.50 lakh crore on September 9, following the mobilisation of $127.23 billion through a special RBI window. FCNR(B) deposits allow non-resident Indians to hold funds in foreign currencies. Banks incur interest costs on these deposits even while the money awaits deployment.

Setty expects lenders to use the funds responsibly rather than accelerate lending merely to reduce idle balances. Axis Bank MD and CEO Amitabh Chaudhry flagged the possibility of aggressive lending and stressed careful borrower assessment. Weaker checks could turn today's surplus into future bad loans.

Loan demand offers a route to absorbing the cash. SBI Managing Director Ashwini Kumar Tewari put the bank's lending pipeline above ₹9 lakh crore, covering undisbursed term lending and unused working-capital facilities. With market borrowing rates elevated, several large companies are turning to banks for finance.

CareEdge Ratings' Sanjay Agarwal views the surplus as temporary, with credit expanding at 17-18% against typical deposit growth of 10-11%. Economists expect excess liquidity to persist through at least November or December. Banks may also substitute costlier bulk deposits or certificates of deposit with FCNR(B) funding, while RBI could consider liquidity measures after upcoming GST and tax payments.