Quick Summary
The Indian banking system slipped into liquidity deficit mode for the first time in the current financial year, largely due to outflows from advance tax payments and GST. According to the Reserve Bank of India (RBI) data, the net liquidity deficit stood at Rs 31,986 crore on Monday, the sharpest dip since March 28. Economists noted that the liquidity crunch is temporary and will likely ease once government expenditure picks up in the coming weeks. "The advance tax payments and GST outflows led
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FAQ :
The banking system has entered a liquidity deficit mainly due to outflows from advance tax payments by corporations and high-income taxpayers, as well as GST payments by businesses.
The net liquidity deficit stood at Rs 31,986 crore on Monday.
No, economists believe the liquidity crunch is temporary and is expected to ease once government expenditure picks up and with the next tranche of the CRR cut.
The RBI conducted two variable rate repo (VRR) auctions, through which banks borrowed a total of Rs 1.4 trillion.
Liquidity conditions are expected to normalise quickly with government spending resuming at the start of October and additional support from the RBI's CRR cut.
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