India’s topsy-turvy money market needs a remedial plan
- Varying liquidity at banks in recent months has played a big role in anomalies that could possibly be fixed by a shift in RBI’s approach.
The money market in India has witnessed unusual scenes in the last few months. There has been pressure on liquidity ever since the Reserve Bank of India (RBI) introduced an incremental cash reserve ratio (ICRR). About ₹1.1 trillion withdrawn through it turned the market around. From a state of surplus liquidity, the system now tends to be in a state of deficit on several days, exhibiting some curious tendencies.