Banks borrow over Rs 50k cr from RBI, but call rate stable

RBI says liquidity not big problem, scales up buyback over 10-fold.

Banks borrowed over Rs 50,000 crore on Monday from the Reserve Bank of India (RBI) to stock themselves with adequate liquidity, under pressure due to the huge payment of telecom spectrum suction fees and the first installment of advance tax.

While RBI has taken steps, including repurchase of bonds, to ease liquidity pressure, they prefer caution, said dealers.

The net borrowing at RBI’s Liquidity Adjustment Facility (LAF) was Rs 51,075 crore as against Rs 38,520 crore on Friday, according to RBI data.

RBI had conducted a second auction on Monday (it did the first one last Friday) to buy back bonds. The figure it had held out last week was for a buyback of around Rs 10,000 crore. Banks offered to sell bonds worth Rs 7,430 crore. Yet, RBI accepted bonds for only Rs 806 crore, indicating it saw no need to go beyond this.

Last week, at the first buyback auction, RBI bought bonds worth Rs 8,000 crore. This indicates the squeeze on cash conditions is not intense, said a dealer with a public sector bond house.

The call rate ruled around 5.40 per cent, above the repo rate of 5.25 per cent. The banks' demand for funds may remain high in the first week of the reporting fortnight.

Liquidity has been tight following outflows of over Rs 1,00,000 crore towards third generation (3G) mobile spectrum and broadband auction payments, as well as advance tax payments, which have pushed up cash rates.

The call rate may ease to 5.25 per cent levels in the later trade if demand wanes, but is unlikely to fall below 5.1 per cent. Banks may borrow around Rs 30,000-35,000 crore at the repo window.

RBI Deputy Governor Subir Gokarn on Monday said the current tight liquidity situation was temporary and the central bank would consider other means to resolve the issue if the current measures do not help.

Meanwhile, RBI announced the government would go ahead with its scheduled plan to borrow Rs 15,000 crore, for which the auction will be held on Friday.