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Liquidity slips into deficit on high credit growth, festival loan demand

Banks face pressure to raise deposits; weighted average call rate highest in 3 years

cash, funds, investment, growth, profit, loss, money, bonds, liquidity, currency
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In October so far, the first time that system slipped into deficit was on Monday. Prior to that, the RBI had absorbed a daily average of close to Rs 90,000 crore so far in the month.

Bhaskar Dutta Mumbai
A sharp uptick in credit demand, higher consumption during the festival season, and dollar sales by the Reserve Bank of India (RBI) in the foreign exchange market have led to liquidity in the banking system tightening sharply.
 
The weighted average call rate (WACR), which is the operating target of the RBI’s monetary policy, is currently at its highest since April 30, 2019, reflecting the shrinking liquidity in the system. The spread between the WACR and the repo rate, too, is at its highest since February 7, 2019 -- the day when the RBI started a monetary easing cycle, which saw

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