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The Reserve Bank's liquidity measures announced last week to drain surplus from the banking system lifted weighted average call money rates by 0.12 per cent on Monday, experts said. The measures, including moves to increase the daily CRR maintenance limit to 99 per cent and bond sales through open market operations, will also help accelerate rate hike transmission, they said. The weighted average call money rate on Monday stood at 5.43 per cent against 5.31 per cent on October 9, according to the Clearing Corporation of India's (CCIL) data. Money market experts said high surplus liquidity in the banking system can weaken the transmission of a policy rate hike by reducing banks' dependence on market borrowings and allowing them to meet credit demand using readily available funds. When banks have ample liquidity, they face less pressure to raise deposit rates to attract funds, which can delay an increase in lending rates for borrowers. The excess liquidity also keeps short-term money
India must cut the statutory liquidity ratio (SLR) to boost job-intensive manufacturing, former NITI Aayog chief executive Amitabh Kant said. Kant said the production-linked incentive (PLI) is a short-term solution for the manufacturing sector, but in the long term, "we need to reduce the cost of doing business through measures like cutting the SLR, which can reduce the cost of credit". "Statutory liquidity ratio at 18% is too high for India ... I am a great believer in bringing it down because flow of credit to manufacturing sectors will be the key in the long run," Kant told PTI. Without sharing the ideal level of SLR, the mandatory share of net demand and time liabilities or deposits banks invest in government securities, the retired bureaucrat maintained that the cost of credit and availability of resources will be essential to help the manufacturing sector. SLR was cut to 18 per cent over a few years, but it has remained at that level since then. While it helps the government'
The Reserve Bank of India (RBI) on Monday absorbed Rs 2,10,192 crore liquidity from the banking system through two overnight Variable Rate Reverse Repo (VRRR) auctions, amid huge surplus liquidity in the system. During the first auction, the central bank received bids worth Rs 2,10,688 crore for a notified amount of Rs 2 lakh crore. It accepted Rs 2,00,050 crore at a weighted average rate of 5.24 per cent. However, the response from banks in the second auction was tepid, with just Rs 10,142 crore in bids for a notified amount of Rs 50,000 crore, which the central bank accepted fully. Over the last two months, the central bank has undertaken multiple VRRR auctions to absorb excess surplus liquidity from the banking system and align the overnight money market rates to the repo rate. Currently, liquidity in the banking system is estimated to be in surplus of around Rs 5.16 lakh crore as on October 4, as per RBI data. The banking system has been flush with liquidity due to heavy ...
The Reserve Bank of India (RBI) on Monday accepted bids worth Rs 25,000 crore in the second tranche of its open market operation (OMO) sale of government securities, as it stepped up efforts to absorb surplus liquidity from the banking system. The RBI accepted Rs 11,512 crore of the 6.10 per cent GS 2031, Rs 8,758 crore of the 7.95 per cent GS 2032, Rs 2,300 crore of the 6.75 per cent GS 2029, Rs 2,250 crore of the 7.17 per cent GS 2030, and Rs 180 crore of the 7.17 per cent GS 2028, according to the release. However, the central bank did not accept any bids for the 8.28 per cent GS 2027, the release said. The OMO sale comes amid a large liquidity surplus in the banking system. Liquidity surplus was estimated around Rs 6.05 lakh crore as of September 20, according to the RBI data. Under an OMO sale, banks and other investors pay the RBI for the government securities, thereby draining rupee liquidity from the banking system. The central bank had announced OMO sales totalling Rs 1 la
The Reserve Bank of India (RBI) on Thursday absorbed Rs 2.40 lakh crore through variable rate reverse repo (VRRR) auctions from the banking sector amid huge surplus liquidity. The central bank received bids worth Rs 2,39,959 crore, which it accepted fully, at a cut-off and weighted average rate of 5.24 per cent. The RBI has been, since last month, doing various VRRR auctions in order to absorb excess surplus liquidity from the banking system and align the overnight money market rates to the repo rate. Currently, liquidity in the banking system is estimated to be in surplus of around Rs 7.38 lakh crore as on September 16. Apart from VRRR, last week, the central bank announced Open Market Operation (OMO) sales of government securities for a notified amount of Rs 1 lakh crore in three tranches. The first tranche of Rs 50,000 crore will be held on September 17, and Rs 25,000 crore each on September 21 and September 28, RBI said. The banking system has a huge surplus of liquidity due
The Reserve Bank of India (RBI) on Wednesday absorbed Rs 2.90 lakh crore through two variable rate reverse repo (VRRR) auctions from the banking system amid a huge surplus. In the first auction, the central bank received bids worth Rs 3,17,088 crore for a notified amount of Rs 2.50 lakh crore. However, it accepted only Rs 2,50,025 crore at a cut-off and weighted average rate of 5.24 per cent. The central bank received a tepid response in the second auction with bids worth Rs 40,302 crore for a notified amount of Rs 1 lakh crore, which it accepted fully. The RBI, since last month, has been conducting various VRRR auctions in order to absorb surplus liquidity from the banking system and align the overnight money market rates to the repo rate. Currently, liquidity in the banking system is estimated to be in surplus of around Rs 9.85 lakh crore as on September 15. Apart from VRRR, last week, the central bank announced Open Market Operation (OMO) sales of government securities for a ..