Banking System Liquidity Turns Deficit Despite RBI Support

• Banking system liquidity turned deficit today, reaching Rs 60,787.81 crore as of December 17, after nearly two months.
• This deficit occurred despite continuous support from the Reserve Bank of India (RBI) through VRR auctions, OMO purchases, and USD/INR Buy/Sell swap auctions.
• Experts attribute the deficit to outflows from advance tax payments and mutual fund redemptions.
• This is the third instance of liquidity deficit in the current fiscal year, following deficits in late October and September.
• RBI has infused significant liquidity, including Rs 1 lakh crore via OMO and USD/INR swap, and Rs 2.09 lakh crore through VRR auctions this week.

Why It Matters: Banking system liquidity is in deficit despite RBI's efforts, due to tax outflows and fund redemptions.