Banking liquidity returns to surplus mode after three weeks: RBI data

Banks park Rs 2,760 cr with central bank as RBI hints at open market operations

Liquidity in the banking system returned to surplus on Friday, helped by government spending and after being in the deficit mode for three weeks.

Banks parked Rs 2,760 crore on Friday, according to the data released by the Reserve Bank of India (RBI) on Monday.

“The surplus liquidity is because of government spending,” said a dealer at a state-owned bank. “The RBI should be aware that is why they said on Friday that the liquidity is in surplus mode,” he said.

Liquidity fell into mode on September 15 on the back of advance tax outflows and goods and services tax payments.

The deficit liquidity neared Rs. 1.47 trillion on September 19, the highest since January 29, 2020, when it went up to Rs 3 trillion. Liquidity went into deficit mode for the first time in this financial year on August 21.

RBI Governor Shaktikanta Das said on Friday that the central bank might conduct open market operations (OMO) to mop up excess liquidity.

“Going forward, while remaining nimble, we may have to consider OMO-sales to manage liquidity, consistent with the stance of monetary policy. The timing and quantum of such operations will depend on the evolving liquidity conditions,” said Das when he gave a statement on policy rates.

The RBI’s Monetary Policy Committee (MPC) panel kept the repo rate unchanged at 6.5 per cent for the fourth consecutive time on Friday.

The MPC has identified high inflation as a major risk to macroeconomic stability and sustainable growth, said Das. Accordingly, the focus remains on aligning inflation to the 4 per cent target on a durable basis.