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Banking system liquidity slips into deficit
August 22, 2023
The liquidity in the banking system slipped into the deficit mode on August 22 for the first time this fiscal year to ₹23,644.43 crore, according to the Reserve Bank of India (RBI) data.
Dealers attributed this to the temporary withdrawal of liquidity due to Incremental Cash Reserve Ratio (I-CRR) and outflows on account of goods and services tax (GST) outflows. According to the Bloomberg data, the banking system liquidity turned into deficit for the first time since March 26, 2023.
On August 10, the central bank said that with effect from the fortnight beginning August 12, scheduled banks will have to maintain an I-CRR of 10 percent of the increase in their net demand and time liabilities (NDTL) between May 19 and July 28.
This narrowed the surplus liquidity by over ₹1.42 lakh crore as on August 13. The outflow on account of I-CRR was broadly in line with estimates outlined by RBI Governor Shaktikanta Das and market players. At a press meet after the last Monetary Policy Committee (MPC) meeting, Das had said that the I-CRR will suck out about ₹1 lakh crore. Liquidity narrowed due to heavy GST outflows and auctions.
According to a Kotak Mahindra Bank report of August 21, for the week from August 19 to 25, outflows worth ₹1.50 lakh crore of GST was expected, and ₹63,430 crore outflows on account of auctions of state loans, Treasury bills and governments securities.
According to a Kotak Mahindra Bank report of August 21, for the week from August 19 to 25, outflows worth ₹1.50 lakh crore of GST was expected, and ₹63,430 crore outflows on account of auctions of state loans, Treasury bills and governments securities.
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