Liquidity in the banking system in India has reached its lowest level in nearly six months, causing borrowing costs to rise. Outflows from corporate advance taxes and the Reserve Bank of India's efforts to stabilise the rupee have drained lenders of funds. The RBI has injected funds into the banking system to address the tight liquidity conditions. The rupee has been weakening against the US dollar due to higher crude oil prices, and the RBI has intervened in the currency market through dollar sales. The liquidity situation is expected to improve by the end of the week.
