After three weeks, liquidity in the banking system returned to surplus last Friday because of government spending.

With government spending to continue, the surplus is expected to grow.

Besides, the withdrawal of the incremental cash reserve ratio (ICRR) requirements by the Reserve Bank of India (RBI) will further increase the surplus.

Numbers released by the RBI showed banks parked Rs 2,760.37 crore on October 6, which rose to Rs 5,390.67 crore on October 7 and Rs 9,071.67 crore the following day.

On October 5, the banking system showed deficit liquidity of Rs 34,061.33 crore.

While the RBI has been keen to keep liquidity tight, its decision in August to implement ICRR following the withdrawal of the Rs 2000 currency notes further squeezed the surplus.

The ICRR requirements were withdrawn a month later and the entire sum returned to the banking system by October 7.