RBI Faces Calls to Explain Costly Dollar Deposit Scheme

Ajit Ranade says the Reserve Bank of India should explain its dollar deposit scheme.

The scheme has brought dollars into the banking system.

When the dollars are changed into rupees, banks get a lot of extra money.

The extra money has helped create a surplus of nearly ₹10 trillion.

Too much money could contribute to inflation or encourage risky lending.

The central bank may try to remove some of this money by selling government bonds.

Selling bonds can lower their prices and raise their interest rates, called yields.

That could make it more expensive for the government to borrow, adding to its already large interest costs.