India finance ministry calls banks to discuss new facility to drain cash

Mumbai: India’s finance ministry has called bankers into a meeting on Friday to discuss setting up a new facility to absorb surplus cash in the banking system, according to a letter sent to heads of lenders seen by Reuters on Thursday. The finance ministry wants to discuss implementing a new framework called a “standing deposit facility”, the letter said, that would drain surplus cash at a rate lower than the repo rate without the need for any collateral. The cash would be deposited with the Reserve Bank of India, and revives a proposal issued by the central bank in 2014 as another way to drain funds.