The liquidity in the banking system improved to a one-month high surplus of Rs 2.23 trillion on Monday, according to the latest data by the Reserve Bank of India (RBI). This came about on the back of government spending. “Government spending is the reason for the rise in liquidity. It might improve further but there will be some action by the RBI to manage liquidity,” said Indranil Pan, chief economist, YES Bank. The RBI conducted two variable rate reverse repo auction on Tuesday to drain excess liquidity from the banking system. Banks parked a total of Rs 62,365 crore at the auctions, against notified amount of Rs 1.75 trillion. The yield on the benchmark 10-year government bond settled at 6.87 per cent on Tuesday, against the previous close of 6.88 per cent. Government bonds were further aided by the influx of funds by foreign portfolio investors (FPIs) in the debt segment, said market participants. FPIs infused Rs 16,253 crore over the month.