Banking System Liquidity

The outstanding liquidity in the banking system widened further in the holiday truncated week ending November 20, 2020. The outstanding liquidity aggregated Rs. 5.20 lakh crore as on November 20, 2020, Rs. 4,261 crore higher than Rs. 5.16 lakh crore as on November 13, 2020. On a daily basis, it reached its peak on November 19, 2020 at Rs. 5.82 lakh crore, the highest since first week of May 2020. Thereafter, it moderated on the last
working day of the week.

The sustained liquidity surplus in the banking system can be attributed to deposit growth persistently surpassing bank credit growth. The incremental bank deposit growth was at 6%, higher than the incremental bank credit growth by 0.3% as on November 6, 2020. The RBI’s durable liquidity infusion measures via OMO purchases (announced and unannounced) aggregating Rs 32,830 crs in November 2020 has also supported liquidity in
the banking system. So far this fiscal, the RBI has undertaken total OMO purchases of Rs 3.17 lakh crores while OMO sales of Rs 89,900 crores (including simultaneous purchase and sale of OMOs). However, the partial moderation during the week can be ascribed to government borrowings (central government: Rs. 22,000 crore, state government: Rs. 8,716 crore) along with statutory tax and GST payments.

The daily net absorption by the RBI from the banking system, i.e., the daily repo and reverse repo operations (including the fresh term repo and reverse repo auction and excluding the outstanding term repo and reverse repo operations) for the week ending November 20, 2020 was at Rs. 6.68 lakh crore, nearly unchanged from a week ago (Rs. 6.66 lakh crore as on November 13, 2020).