The outstanding liquidity in the banking system remained in surplus position, a weekly liquidity report by Care Ratings shows.
"As on September 25, 2020, the outstanding liquidity in the banking system amounted to Rs. 2.83 lakh crore, Rs. 26,129 crore higher than the previous week (Rs. 2.57 lakh crore as on September 18, 2020). The banking system continued to remain in surplus position as the bank deposit growth persistently surpassed bank credit off take. The incremental bank deposit growth was 5% as against incremental bank credit contraction by 1.4% as on September 11, 2020.
However, partial moderation in the banking system liquidity in September 2020 can be ascribed to reversing of LTROs by the banks (Rs. 1.24 lakh crore till September 18, 2020) and auction of repo auction Rs. 1,000 crore. In addition, improved credit flows to MSMEs under the Emergency Credit Line Guarantee Scheme ("ECLGS scheme") might have capped the liquidity surplus in the banking system," the report states.
According to Care Ratings under Rs. 3 lakh crore of Emergency Credit Line Guarantee Scheme for MSMEs, banks have sanctioned Rs. 1.77 lakh crore to the 44.2 lakh MSMEs out of which Rs. 1.25 crore were disbursed to 25.7 lakh business units till September 21, 2020. Higher state government borrowings on September 22, 2020 amounting Rs. 14,298 crore as against notified Rs. 12,798 crore could also have supported reduction in the liquidity surplus.