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On Wednesday, the surplus liquidity in the banking system was around Rs 1.76 trillion, while it was approximately Rs 1.35 trillion on Tuesday. The surplus was over Rs 1 trillion in the past few days.
The surplus liquidity in the system has cooled off the overnight rates, which dropped to 6.15 per cent on Thursday. According to the Clearing Corporation of India data, the weighted average call rate was 6.32 per cent on Thursday as compared to 6.33 per cent in the previous day.
In the recent weeks, the RBI has been buying foreign currencies infusing rupee liquidity, which was also reflected by the rise in the foreign exchange reserves. After rising for two consecutive weeks, foreign exchange declined for the week ended May 19.
Earlier this week, State Bank of India Chairman Dinesh Khara said around Rs 17,000 crore worth Rs 2,000 notes were deposited and exchanged by the bank since the withdrawal process started.
The Rs 2,000 note was introduced in 2016 after the legal tender status was withdrawn for the then Rs 500 notes and Rs 1,000 notes during the demonetization exercise.
Sengupta said liquidity conditions were likely to improve, going ahead.
“We expect liquidity conditions to improve with the government cash surplus improving to Rs 1.3 trillion by May 26 from the temporary deficit in April. Government cash surplus is expected to rise by the end of May post the credit of the RBI dividend, which will support government expenditure in June. The Rs 2,000 note withdrawal is also expected to provide a transient liquidity boost till September by reducing currency leakage as individuals deposit a part of the notes,” Sengupta said.
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