BANKING SYSTEM LIQUIDITY IN INDIA

BANKING SYSTEM LIQUIDITY IN INDIA

Thursday, August 27 2020

Banking system liquidity is important to an economy as adequate liquidity fosters growth, investment and stability of interest rates& exchange rate. Liquidity is a pre-requisite to smooth operation of banking businesses. Infact liquidity is an important determinant of growth, development and survival of banks.

An excess liquidity situation leads to appreciation in asset prices or inflation; a deficit position mutes demand and leads to contraction of economic activities. Therefore, adroit management of system liquidity is crucial for all economies and the responsibility is assigned to the Central Bank, being the monetary authority.

Banking system liquidity is important to an economy as adequate liquidity fosters growth, investment and stability of interest rates& exchange rate. Liquidity is a pre-requisite to smooth operation of banking businesses. Infact liquidity is an important determinant of growth, development and survival of banks.

An excess liquidity situation leads to appreciation in asset prices or inflation; a deficit position mutes demand and leads to contraction of economic activities. Therefore, adroit management of system liquidity is crucial for all economies and the responsibility is assigned to the Central Bank, being the monetary authority.

Banking system liquidity is important to an economy as adequate liquidity fosters growth, investment and stability of interest rates& exchange rate. Liquidity is a pre-requisite to smooth operation of banking businesses. Infact liquidity is an important determinant of growth, development and survival of banks.

An excess liquidity situation leads to appreciation in asset prices or inflation; a deficit position mutes demand and leads to contraction of economic activities. Therefore, adroit management of system liquidity is crucial for all economies and the responsibility is assigned to the Central Bank, being the monetary authority.

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