Liquidity pressure Global liquidity scare and credit squeeze led to constrained access to funds for Indian entities, and some of the corporates shifted their demand for funds to local markets.
The pressure on the balance of payments, led by net capital outflows in the third quarter of 200809 and the associated intervention sales by the RBI in the forex market also implied corresponding withdrawal of domestic liquidity from the banking system, which the RBI had to more than offset by expanding liquidity against domestic assets in its balance sheet.