SBI turns to repo, says liquidity to remain tight

State Bank of India, the country’s largest lender, has turned a borrower at the Reserve Bank of India’s repo window.

The bank, which remained in surplus territory even during the height of the global financial crisis, borrowed during the liquidity adjustment facility operations conducted by RBI.

“We are okay. We are comfortable but not in surplus. Yesterday we borrowed from the repo,” SBI Chairman O P Bhatt told reporters on the sidelines of an Indian Banks’ Association event in the evening.

Liquidity conditions tightened in the market following the payment of Rs 68,000 crore by telecom companies towards spectrum fee for third generation (3G) mobile telephony services. As a result, banks have borrowed over Rs 60,000 crore on a net basis through the repo route — the highest level since the global financial crisis when even banks were wary of lending to each other.

The crisis had prompted SBI and other public sector banks, which were also seen as safer bets in those times, to offer high deposit rates to mobilise funds and keep more than sufficient liquidity. The effect of those fund-raising was seen till a fortnight ago with SBI having over Rs 20,000 crore in surplus. But that cash has vanished with SBI being the largest lender to telecom firms towards spectrum payment.

Bhatt said cash conditions are likely to remain tight in the Indian banking system in the short term and added that the tight cash conditions could impact the bond market.