27 C
Monday, July 22, 2024

For the first time in FY24, India’s banking system liquidity was in deficit.

<p>Following a brief withdrawal of liquidity by the Reserve Bank of India and tax outflows, India’s banking sector has experienced a liquidity deficit for the first time this fiscal year. Data from the RBI show that as of August 21, there was a $2.84 billion imbalance in the liquidity of the banking sector. After the RBI instructed banks to hold an incremental cash reserve ratio (CRR) of 10% on an increase in deposits between May 19 and July 28, which led to the withdrawal of more than one trillion rupees, the surplus, which peaked at Rs 2.8 trillion at the beginning of this month, has been declining.</p>
<p><img decoding=”async” class=”alignnone wp-image-140487″ src=”https://www.theindiaprint.com/wp-content/uploads/2023/08/theindiaprint.com-download-94-3.jpg” alt=”theindiaprint.com download 94 3″ width=”1500″ height=”832″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2023/08/theindiaprint.com-download-94-3.jpg 301w, https://www.theindiaprint.com/wp-content/uploads/2023/08/theindiaprint.com-download-94-3-150×83.jpg 150w” sizes=”(max-width: 1500px) 100vw, 1500px” title=”For the first time in FY24, India's banking system liquidity was in deficit. 9″></p>
<p>As of August 21, 2023, the cash balance with the RBI was Rs 987,153.85 crore.</p>
<p>In recent years, the declared policy of the RBI on liquidity has been to keep enough liquidity in the system to support the productive needs of the economy. It is thought that too much liquidity puts financial stability and price stability at risk. The degree of excess liquidity should be regularly assessed for effective liquidity management.</p>
<p>Therefore, scheduled banks were required to maintain an incremental cash reserve ratio (I-CRR) of 10% on the rise in their net demand and time liabilities (NDTL) between May 19, 2023 and July 28, 2023, with effect from the week commencing August 12, 2023.</p>
<p>The return of the Rs 2000 notes to the banking system was one of the causes mentioned before that caused the excess liquidity, according to the RBI Governor Shaktikanta Das, who spoke at the RBI’s Monetary Policy Committee (MPC) meeting that ended on August 10, 2023.</p>
<p>The return of the Rs. 2000 banknotes to the banking system, the RBI’s transfer of surplus funds to the government, an increase in government expenditure, and capital inflows, according to Das, have all contributed to an increase in the amount of excess liquidity in the economy recently. In June and July 2023, respectively, the total daily absorption under the liquidity adjustment facility (LAF) was Rs. 1.7 lakh crore.</p>
<p>To release the seized cash to the banking system in time for festival season, the I-CRR will be reviewed on September 8, 2023, or earlier.</p>

Related Articles

- Advertisement -
- Advertisement -
- Advertisement -
error: Content is protected !!