Banking system liquidity turns deficit amid tax payments, GST outflows

The banking system liquidity fell into deficit mode for the first time in the current financial year, since 28 March, on the back of advance tax payments and GST outflows. The net liquidity in the banking system was in a deficit of Rs 31,986 crore on Monday, according to the latest data from the central bank.

 

Experts said the liquidity crunch is expected to be temporary and will pick up on the back of government expenditure. 

“The advance tax payments and GST outflows led to the temporary tightness in liquidity,” said Gaura Sen Gupta, chief economist, IDFC First Bank. “It will improve once government expenditure kicks in at the start of the month and with the next tranche of the CRR cut,” she added. 

 

Consequently, the RBI conducted two variable rate repo auctions, where banks parked a total of Rs 1.4 trillion against the cumulative notified amount of Rs 2 trillion.