An Axis Bank Economic Research report says India's banking system liquidity has tightened sharply toward zero, driven by elevated Government of India (GoI) balances, RBI forex operations and rising cash demand before the festive season. Durable liquidity stands at 3.2 per cent of NDTL, overnight rates have risen, and banks have turned back to the Variable Rate Repo (VRR). The report expects the gap between deposit and credit growth to reopen and bank funding conditions to worsen further. Seasonal patterns suggest liquidity will ease for a time in early December, but festival-season currency demand is likely to keep it low.
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