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Banking System Liquidity turns to deficit mode

Banking System Liquidity turns to deficit mode

Banking System Liquidity turns to deficit mode: Banking system liquidity has turned into a deficit mode for the first time since May 2019.

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Key facts

About banking system liquidity

Liquidity in banking system refers to the readily available cash the bank requires to meet the short-term business and financial needs. If the banking system is a net borrower from the RBI under the Liquidity Adjustment Facility (LAF), the banking system liquidity is said to be deficit. If the bank is the net lender to RBI, the system liquidity is surplus. Liquidity Adjustment Facility (LAF) is a tool used by the central bank to inject or absorb liquidity into or from the banking system in the country.

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