India’s banking system liquidity slips into deficit first time in FY24

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India’s banking system liquidity has slipped into deficit for the first time this financial year after the Reserve Bank of India’s temporary liquidity withdrawal move and tax outflows.

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Banking system liquidity stood at a deficit or Rs. 236 billion ($2.84 billion) as of Aug. 21, according to RBI data.

Surplus had hit a high of 2.8 trillion rupees at the start of this month, but has since been dropping, especially after the RBI told banks to hold an incremental cash reserve ratio (CRR) of 10% on increase in deposits between May 19 and July 28, which has led to withdrawal of over one trillion rupees.