Why is banking system liquidity tightening?
Sep 27, 05:09

Banking system liquidity refers to readily available cash that banks need to meet short-term business and financial needs. As on September 23, the net liquidity absorbed by the Reserve Bank of India stood at Rs 17,172 crore, down from Rs 2.1 lakh crore on September 3. The principal factor behind the tightening liquidity is the hefty goods and service tax outflow, which typically happens around the 20th of every month. There is also a disparity between credit growth and deposit growth at banks. The RBI's dollar sales in the forex market to arrest the rupee's fall has also sucked out banking system liquidity.

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