Liquidity pressure to be manageable this week

With adequate resources in banks’ kitty, the liquidity in the system is not expected to see much strain this week, ahead of advance corporate tax payments by September 15.

Treasury officials said even as the system remained in deficit — an outcome of the Reserve Bank of India stance to check inflation — the market would be able to meet any additional demand for funds.

However, some banks that are working to meet their balance sheet target for the September-end quarter may feel the pressure. With low credit offtake, banks were parking deposit money in government bonds, a treasury executive with a public sector bank said.

Liquidity for the week ended September 2 remained at negative average of Rs 38,000 crore to Rs 56,000 crore. Banks borrowed Rs 39,055 crore from RBI’s repo window and deposited Rs 120 crore at its reverse repo window on Friday (September 2). Net liquidity injected by RBI stood at Rs 39,935 crore, compared to Rs 47,475 crore on Tuesday.

The issuance of certificate of deposits (CDs) has seen a rise as banks prepare for the second tranche of advance tax payments, estimated to be at about Rs 60,000 crore. But, it has not led to any uptick in money market rates. Three-month CDs were placed at 9.0 per cent while one-year paper carried coupons of around 9.50-55 per cent.

Some pressure may be felt in the week beginning September 12, when the money would temporarily move out of the system.