'Liquidity to remain comfortable in Q4'

Liquidity is expected to remain comfortable in the quarter ended March 2008 as banks have substantial resources (deposits and investments) to fund any acceleration in credit demand, according to M B N Rao, chairman, Canara Bank.

The banking sector raised about Rs 3,20,000 crore in the current financial year, till early December 2007. The credit offtake from April to early December was nearly Rs 1,60,000 crore and investments exceeded Rs 1,65,000 crore, Rao told reporters on the sidelines of a banking technology seminar.

Bank credit grew by 8.4 per cent between April and December 7. The year-on-year growth is likely to be less than 24 per cent.

Reserve Bank of India has been lately mopping up excess funds through liquidity adjustment facility (LAF). The RBI data indicates that banks have build a sufficient resource base through investments in securities.

For funding any increase in credit demand, banks can liquidate a part of their securities portfolio, Rao said.

He also did not see need for banks to enter into "unhealthy" competition to raise resources by jacking up deposit rates. "It does not make sense to build up liability at higher rates."