MUMBAI, March 23 (Reuters) - 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 all heads of lenders seen by Reuters on Thursday.
The finance ministry wants to discuss implementing a new framework called a "standing deposit facility" that would drain the surplus cash at a rate lower than the repo rate without the need for any collateral, the letter said.
The proposal on draining surplus cash through such a facility had previously been mooted by the Reserve Bank of India.
Banks have seen a surge in cash deposits after Prime Minister Narendra Modi last year banned higher-value note bills.
(Reporting by Suvashree Dey Choudhury and Devidutta Tripathy; Editing by Randy Fabi)
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