Excess liquidity in India's banking system back to pre-Covid levels

A section of the market sees further liquidity tightening measures from the RBI in the June review of the monetary policy

Concerned over inflationary pressures in the economy, the Reserve Bank of India (RBI) is bringing down surplus liquidity in the system rapidly. It has fallen to pre-Covid levels and almost 2 per cent of banks’ net demand and time liabilities (NDTL).

NDTL shows the difference between the sum of demand and time liabilities (deposits) of a bank (with the public or the other bank) and the deposits in the form of assets held by the other bank.

This sudden withdrawal of liquidity at a rapid pace has surprised banks since the central bank had earlier said it would bring down surplus liquidity