India's central bank chief said on Friday that one of major difficulties monetary authorities faced was grappling with excess funds in the banking system.
"There is plenty of liquidity," Bimal Jalan told a bank economists' conference. "One of the problems we are facing today is management of liquidity."
Analysts and traders say that liquidity has received a boost in recent months due to huge foreign exchange inflows which have been mostly absorbed by the central bank.
Two weeks back, Jalan had acknowledged that rising forex inflows were posing a problem to monetary management.
He said that despite the worst drought in 15 years, the country's external finances were in good shape with record foreign exchange reserves of more than $68 billion and a comfortable balance of payment situation.GDP growth likely to be 5-5.5%: Jalan
RBI chief says inflation outlook uncertain
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