Banking liquidity moves to surplus due to govt spending, RBI concerned

The liquidity in the banking system moved back into surplus mode on Tuesday on the back of government spending, market participants said. However, the market believes that the banking liquidity might again fall back into deficit mode as the Reserve Bank of India (RBI) is not comfortable with the surplus liquidity. “Only aid to liquidity is the government spending,” a dealer at a state-owned bank said. “It will again fall into deficit because the RBI seems to be comfortable when the liquidity is negative. Also, the market is now used to borrowing at MSF rate,” he added.
 

The banks parked Rs 1,512 crore with the RBI on Tuesday, according to the data released by RBI.
 

The liquidity has largely remained in deficit since September 15. It neared Rs 1.47 trillion on September 19, the highest since January 29, 2020, when the banking system liquidity deficit went up to Rs 3 trillion.