India needs to pump more cash into its financial system to prevent a worsening of the funding crisis among shadow banks and the corporate sector, according to one of the nation’s biggest money managers. Muted government spending and high election-linked expenditure have created a cash deficit in India’s banking system in the past few months. Authorities are already using open-market debt purchase operations and currency swaps as a “potent liquidity tool," but more is needed to get enough cash into the system, Iyer said. India’s cash deficit, measured by how much lenders need to borrow from the central bank to carry out their operations, is the worst since 2016, according to data compiled by Bloomberg. The banking system has experienced a liquidity deficit for all but 10 days so far in 2019, the data show.

Source: Mint May 16, 2019 05:48 UTC