India's Banking System Faces Historic Liquidity Deficit: RBI Data

New Delhi, Jan 24 (KNN) The Reserve Bank of India (RBI) has reported that India's banking system is facing an unprecedented liquidity deficit, reaching a record high. This situation has been aggravated by outflows for tax payments and restrained government spending.

As of January 23, the liquidity deficit surged to Rs 3.34 trillion ($40.18 billion), nearly tripling from the beginning of the month, as reported by the RBI.

In response to the liquidity crunch, Indian lenders have urged the RBI to alleviate liquidity conditions, given that overnight cash rates persistently remain above the policy rate.

On Wednesday, the call rate stood at 6.85 per cent, and the Treasury Bills Repurchase (TREPS) rate was at 6.78 per cent, both significantly exceeding the repo rate of 6.50 per cent.

While the central bank has undertaken shorter-term repo auctions to infuse cash into the banking system, it has refrained from injecting longer-term funds at this point.

Earlier this month, RBI Governor Shaktikanta Das expressed caution, stating that it would be premature to discuss a monetary policy pivot while inflation continues to be elevated.

As the liquidity deficit presents a growing challenge, market participants keenly await further actions or statements from the central bank to address the pressing issue in India's banking system.

(KNN Bureau)