The Reserve Bank of India R.B.I recently stepped in to address a liquidity crunch in the banking system by injecting ₹6,956 crore into the market. This move came after the banking system, which had maintained a surplus liquidity of approximately ₹1.4 lakh crore for two months, faced a sudden deficit.

Key contributing factors to this deficit included:

Negative Balance of Payments: Outflows from foreign investors weakened liquidity in the system.

. RBI's Dollar Sales: To support the rupee amidst market pressures, the RBI sold dollars, further reducing domestic liquidity.

. Widening Trade Deficit: Increased import costs relative to exports added strain.

Slowing Deposit Growth: A slowdown in the growth of deposits limited banks' available funds