Liquidity deficit hits Rs 1 lakh cr

No respite expected in the near future, say market players.

Despite the Reserve Bank of India (RBI) taking several steps to ease liquidity, banks today borrowed more than Rs 1 lakh crore from the central bank.

Last week, the drawdown from the repo window was around Rs 80,000 crore, much above RBI’s comfort level of Rs 50,000 crore. This, coupled with banks’ tendency to raise a portion of the regulatory capital required on the first day of a new reporting fortnight (ending 28 January), led to a surge in borrowings. Such levels were last seen on January 3 this year.

Open market operations (OMOs) worth Rs 48,000 crore, along with an increase in government spending, eased the liquidity stress to some extent. However, no respite is expected in the future. The government stock auctions reduced the impact of OMOs. Last week, while stocks worth Rs 7,508 crore were purchased by RBI, Rs 11,000 crore of government stock was auctioned.

“This week, we expect the net repo to be Rs 80,000-Rs 1 lakh crore,” said RVS Sridhar, head of global markets, Axis Bank.

Concerns over the liquidity deficit deepened when banks received less-than-expected response to their move to raise deposit rates. In the pre-policy meeting held by RBI last week, bankers had sought more moves to ease liquidity. Their recommendations included a cut in the cash reserve ratio and the statutory liquidity ratio (SLR).

In its mid-quarterly review, RBI had reduced SLR by one percentage point. It also extended the second liquidity adjustment facility window till January 28.