What Caused Liquidity Crunch?

In the Indian context, for controlling inflation, CRR (Cash reserve ratio of balances to be maintained by commercial banks with RBI) was raised earlier, Repo rate, i,e, the  rate at which RBI lends funds to banks was also raised earlier. These two initiatives were aimed at sucking out the excess liquidity from the system so that prices could be controlled. The initiatives drew out the funds from the system.  Another factor was, the rupee was continuously falling against USD on account of inreased demand for dollars from Oil refineries, FII s, and foreign banks for doing arbitrage in NDF market  etc. But the supply of dollars was meagre. Hence RBI had to use some of its forex reserves to pump dollars into the forex market for meeting the day to demand and to prevent volatility in dollar rupee movement. In the process, when RBI sells huge amounts of dollars, simulatneously it receives equivalent in  rupees from the banks thereby draining the system of liquidity.