Indian banks are currently facing a liquidity deficit due to the Reserve Bank of India's dollar sales, which are aimed at supporting the rupee.
This change in liquidity conditions is significant, as earlier this month, banks were able to deposit around 2 trillion rupees of surplus cash with the RBI daily.
The recent dollar sales have resulted in a significant reduction in cash in the financial system, indicating a tightening of liquidity that could impact banking operations and lending activities.