New Delhi, Oct. 7 -- India's banks may have little immediate reason to raise deposit rates after the Reserve Bank of India's 25-basis-point rate hike on Wednesday, as a surge in foreign-currency non-resident (bank), or FCNR(B), deposits has left the banking system flush with liquidity.

RBI governor Sanjay Malhotra said the liquidity surplus is likely to normalize by the end of the current financial year, suggesting the cushion for banks to hold deposit rates steady may not last.

"We have already seen the use of the FCNR(B) deposits as evidenced by the high growth rate, but of course, the amount is so large, we do not want them to use for overnight. They need to do their due diligence properly and take the time to use these deposits," Ma...