Tax payments: spurt in quarter-end activity may squeeze liquidity further

Interest rates on term deposits, money market instruments could go up further, even as RBI may conduct repo operations to maintain liquidity in the system

The remaining three weeks of the month are likely to see further pressure on liquidity due to payment of advance tax by September 15, and a spurt in credit offtake towards the end of quarter (Q2FY23). This could push up interest rates on term deposits and money market instruments further, even as the Reserve Bank of India may conduct repo operations to maintain adequate liquidity in the system.

Bankers and money market dealers said the surplus liquidity in the system has already declined sharply till date in FY23 after a change in RBI's policy stance, which began with the withdrawal