Liquidity surplus in banks races past Rs 4 trn. Will it lead to inflation?

The last such liquidity scene was witnessed just after demonetisation in end of 2016 and early 2017 when banks were parking their deposit-linked money with the central bank

The surplus liquidity in the banking system crossed Rs 4 trillion on Thursday, data released on Friday showed, as the government redeemed Rs 61,000 crore of its bonds issued in 2003, and possibly because of some expenditure done.

The government will be borrowing 70-days money worth Rs 30,000 crore through the Cash Management Bill on Monday, and the Reserve Bank of India did a 63-day reverse repo auction of Rs 25,000 crore on Friday to absorb part of the Rs 4.15 trillion of excess liquidity.

Otherwise, the system liquidity was hovering at around Rs 2-Rs 2.5 trillion in December, and at Rs