SBI DGM [Economist]–” FCNR[B] benefits outwieigh costs “–[1] Hedging cost $16.3 billion while investment income [ US Treasury ] will be $22.4 billion –net surplus being $6.1 billion [ which translates into -Rs.58372 crores at the current exchange rate [2] So it will not be fiscal drag [3] Liquidity dynamics –12 trillion of rupee liquidity offers much relief to banks to lend to the productive sectors and it eases elevated CD ratio [3] Banks may need couple of quarters to use these surplus funds [4] RBI’s forward position will be taken care of [ $100 billion short dollar position with $40 billion maturing within an year –As these positions unwind, liquidity will automatically contract [5] September and October which are — traditionally liquidity strained months –because of advance tax, credit growth–capex revival, government borrowing and import payments ahead of Diwali & festival induced purchases –will have absorbed much of this surplus–Article by Mr Bibekananda Panda