Rs 3,534 Cr Rbi Mop-Up Offsets Crr Cut

The Reserve Bank of India (RBI) yesterday mopped up Rs 1,861 crore by selling government securities, taking the total mop-up since Wednesday to Rs 3,533.90 crore. This effectively means the RBI has sucked out more than the Rs 2,600 crore it would have released through the recent 50 basis points cut in the cash reserve ratio.

However, the liquidity position will not necessarily be strained since there have been steady inflows on account of the maturing of T-bills and coupon flows. Sources point out that the mop-up might even be a last-ditch attempt by the RBI to meet the money supply target of 15.5 per cent, which it is now expected to overshoot.

Incidentally, the government itself is strapped for cash and has been drawing on ways-and-means financing. Besides, it is facing a heavy revenue. At the same time, banks have been parking their surpluses with the RBI at fixed rate repos.They have also been investing in dated securities. Banks anticipate an increase in liquidity and hence an easy money policy.

Given projected inflows of over Rs 9,000 crore in April, banks are buying assets now. With the call rate ruling at 8-8.50 per cent, funding purchases, specially of high-coupon securities like the 12.69 per cent 2002 and the 13.05 per cent 2007, is not a problem.

Confusion prevailed in the market yesterday morning as some dealers said the RBI was not selling bonds despite having released a price list. This reportedly led to players jacking up bond prices.

However, the RBI spokesperson indicated that the RBI had sold securities and by afternoon it had concluded 74 deals, worth Rs 1,861 crore.

Calls ruled between 7.90 per cent and 8.25 per cent while STCI weighted average call money rate was 8.01 per cent on a turnover of Rs 1,700 crore.

In the securities market, there were quotes for the 13.05 per cent 2007 and the 12.69 per cent 2002 at prices above those quoted by the RBI.