Indian Central Bank Takes Steps to Curb Rising Bank Liquidity
Modi Says Cash Crisis Will Ease
The Reserve Bank of India told lenders to set aside more deposits as reserves to curtail surging banking system liquidity that risks stoking inflation.
Banking system funds have surged after Prime Minister Narendra Modi banned 500 rupee ($7.30) and 1,000 rupee notes in a bid to curb graft and ordered people to deposit the money in banks. That has led to lenders accumulating 5.1 trillion rupees in deposits as citizens in Asia’s third-largest economy rush to submit the now defunct bills. The RBI said banking-system liquidity is likely to increase further in the weeks ahead and it has decided to absorb a part of it by “applying an incremental cash reserve ratio (CRR) as a purely temporary measure,” it said in a statement Saturday.