RBI's liquidity clean-up to push bond yields

Central bank has become more aggressive in its liquidity absorption exercise and sold Rs 90,000 crore of bonds in the open market

One year after demonetisation was announced, banking system liquidity is still in surplus territory even as the central bank and the government used all that they had in their means to neutralise the surge of deposits in the banking channel.

Only in the Reserve Bank of India’s (RBI’s) liquidity adjustment facility alone, banks parked their surplus liquidity in excess of Rs 5 lakh crore on November 25, 2016, prompting the RBI to announce 100 per cent cash reserve ratio (CRR), from the normal four per cent, for incremental deposit mobilised over a certain period. CRR is the share of deposits