The liquidity deficit in the banking system during the Q1 of 2012-13 remained above the indicative comfort zone of the RBI-RBI FSR-June'13

RBI, in its seventh Financial Stability Report (FSR) -June 2013 said, "Liquidity conditions in the banking system exhibited mixed trends during 2012-13 with alternating phases of comfortable liquidity and bouts of tightness. The liquidity situation eased at the beginning of the financial year 2012-13 but overall, the liquidity deficit in the banking system during the first quarter of 2012-13 remained above the indicative comfort zone of the Reserve Bank (i.e., +/- 1 per cent of NDTL of the banking system). The situation, however, improved significantly in the second quarter of 2012-13, but came under significant stress during the third quarter, especially after mid-October 2012, on the back of persistently high government balances with the RBI coupled with rise in currency in circulation. The tight liquidity condition prompted the Reserve Bank to resume OMO purchase auctions after a gap of over 5 months. Tight liquidity conditions continued in the fourth quarter of the year as well. On the whole, liquidity conditions in the banking system were much tighter in the second half of the year as compared to the first half. Despite tight liquidity conditions, government bond yields have come down significantly. During the current financial year, the banking system liquidity has generally improved from early June 2013 onwards.

However, the Systemic Liquidity Index (SLI), which is based on a multiple indicator approach that aims to capture the overall funding scenario in the financial system viz., the banking, non-banking financial, the corporate sectors and liquidity in foreign exchange market, shows that the liquidity conditions improved during Q4 of 2012-13."

Powered by Capital Market - Live News