RBI moves to soak up liquidity generated by cash crisis

rupee-india-counting-notes
Old 500-rupee notes being counted

The decision to scrap India's two largest-denomination banknotes at midnight on November 9 led to a surge in liquidity that the Reserve Bank of India (RBI) is now mopping up.

The central bank imposed an "incremental cash reserve ratio (CRR)" on November 26, designed to siphon off the additional liquidity created by deposits of banknotes.

"The magnitude of surplus liquidity available with the banking system is expected to increase further in the fortnights ahead," the RBI said in a statement.

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