Banking liquidity shortage widens to Rs 1.74 trillion
Mumbai: The liquidity deficit in India's banking system widened on Tuesday to its highest level in almost five years due to monthly goods and services tax payments.
However, economists are optimistic that the deficit will shrink in the coming week.
As per the Reserve Bank of India (RBI), the liquidity deficit, which reflects the funds banks must borrow from the interbank market or the central bank, reached 1.74 trillion rupees ($20.90 billion) on Tuesday.
The payment of taxes results in the outflow of funds from the banking system.
As an impact of the liquidity shortage, overnight money market rates have been trading higher than the Reserve Bank of India's Marginal Standing Facility rate of 6.75%.
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