After touching an all-time high of Rs 3.4 trillion last month, the liquidity deficit in the banking system has started to ease. The liquidity deficit declined to Rs 2.4 trillion on Thursday, reflecting a fall of around Rs 1 trillion, according to the Reserve Bank of India data. Experts say that the days of extreme cash squeeze are unlikely to haunt banks again and the deficit in the system is likely to remain in Rs 1.25- 2 trillion range in the next quarter.
The current deficit in systemic daily liquidity levels is due to a combination of seasonal and adhoc factors. Seasonal leakages include demand for tax payments and higher cash in…