The Reserve Bank of India's net short dollar book surged past $200 billion for the first time in August, driven by a diaspora program supporting the rupee. Positions increased by $63.3 billion to $200.1 billion, with short positions in maturities over a year rising to $176.6 billion from $91.5 billion. $133 billion of inflows from diaspora deposits have bolstered foreign-exchange reserves and helped keep the balance of payments in surplus after two years of deficits. Excess liquidity in the banking system surged to 11 trillion rupees earlier this month.

The RBI has been conducting sell/buy swaps in the secondary market to drain cash and lower its short book. The tenor of up to one month flipped to a net long of $12.12 billion from a short book of $13.2 billion in July. Economist Abhishek Upadhyay notes the RBI is trying to prematurely unwind maturities due next year to soak up excess cash.

However, the record-breaking diaspora fundraising drive may prove costly, leaving the central bank with a potential $10.6 billion price tag once deposits mature in three to five years.