RBI may not extend liquidity support beyond April 8

The Reserve Bank of India (RBI) may not extend the additional liquidity support of 1 per cent Statutory Liquidity Ratio (SLR) and the second Liquidity Adjustment Facility (LAF) window beyond April 8.

Bankers say the additional liquidity support is not needed as of now, as the liquidity pressure has eased. RBI had introduced these measures on December 18, 2010 and had extended the measures till April 8, 2011, citing tight liquidity conditions in its third quarterly review of the monetary and credit policy, in January.

“Most banks, especially public sector ones, are currently holding excess SLR. Hence, there is no need to extend the facility,” said a public sector bank treasury official. He said the liquidity condition is expected to remain comfortable till June, after which the credit offtake usually picks up.

“Now that the market is lending to RBI, these measures may not be needed at the moment. I don’t see liquidity pressures till mid-June,” said Moses Hardings, head, global markets, IndusInd Bank. Net LAF has been positive since the beginning of financial year 2011-12.

RBI had provided the liquidity support to scheduled commercial banks under the LAF, to a maximum of 1 per cent of their net demand and time liabilities.