Despite CRR cut, liquidity deficit in banking system crosses Rs 2 trillion

The banking system in India is facing a severe liquidity deficit, crossing ₹2 trillion, despite the Reserve Bank of India (RBI) reducing the Cash Reserve Ratio (CRR) to ease liquidity pressures. The situation indicates that banks are still struggling to meet demand for credit, which could impede economic recovery and growth. Experts argue that while the CRR cut was expected to infuse liquidity, other factors such as a higher demand for government borrowing and inflationary pressures continue to create challenges. The liquidity crunch has raised concerns about the banking sector's ability to lend freely, potentially stalling recovery in key sectors.