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In order to absorb surplus liquidity accrued by banks, RBI last week asked banks to maintain 100% of the deposits (NDTL) accrued between September 16 and November 11 as incremental CRR balance with it.
RBI, however, said it was a purely temporary measure.
According to experts the move is likely to result into over Rs 3 trillion outflow from the banks.
It said the persistence of the surplus liquidity conditions will lead the RBI to evaluate alternatives available for liquidity sterilisation.
The agency continues to believe cash management bills can effectively manage the liquidity - owing to their short tenor and consistency with the monetary policy stance.
It said the decision to mop up excess liquidity will ensure a floor is put on bond yields.
The move, which is temporary in nature, does not impair the longer term profitability of banks, but induces a larger negative carry on CRR in the computation of the marginal cost-based lending rate (MCLR).