IN liquidity deficit widens after GST outflows, liquidity easing announcements awaited India system liquidity slipped into deficit territory starting mid-December on the back of a sizeable increase in GOI cash balances (following advance tax outflows coupled with monthly GST payments). Tight conditions were also driven by the completion of the central bank’s unconventional measures announced during the pandemic (including a series of long-term repo operations). This took money market rates to rise, with the weighted average call rate (WACR) heading above the upper band of the policy corridor (with SDF being the lower bound and the MSF the upper bound rate).
