BUZZ — India bank liquidity surplus below 1% of deposits, over 50% longer VRRR funds withdrawn

India's banking system liquidity surplus slips below 1% of total deposits after central bank's debt sale and as FX reserve restrictions kick in Bank liquidity surplus at 2.57 trillion rupees ($27.08 billion), down over 50% from the previous week, and just about 0.9% of deposits Banks have already withdrawn 420 billion rupees of nearly 800 billion rupees parked with RBI under 29-day reverse repo At its peak on September 6, surplus had hit a record of 11.16 trillion rupees, which was about 4% of deposits Major impact from need for maintaining 20% FX risk reserve on derivative contracts used for hedging current account transactions, traders add "Estimates suggest nearly 400-500 billion rupees has moved out from lenders in lieu of such transactions since the rule kicked in," trader with a private bank says Lenders expect pressure on overnight rates to sustain on last day of fortnight ($1 = 94.9150 Indian rupees) (Reporting by Dharamraj Dhutia) ((dharamraj.dhutia@tr.com)