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[hfe_template id='11223'] [ad_1] Following interactions with lenders amid tight liquidity conditions, the central bank has announced a steep reduction in the quantum of the government’s treasury bill sales and a new selection of bonds for the Centre’s buyback operations to aid freeing up cash for banks. Liquidity conditions in the banking system tightened considerably this month, largely due to a muted pace of government spending amid the ongoing general elections, market participants said. Tight liquidity conditions increase cost of funds for banks, especially at a time when credit growth continues to outpace deposit growth by a long margin. Higher borrowing costs for banks pushes up the cost of borrowing across the economy. So far in May, average daily deficit liquidity as measured by banks’ borrowing from the RBI was at Rs 1.2 lakh crore. Price factor: In recent interactions with the RBI, banks — particularly stateowned lenders — requested that the government securiti...