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Call rate closed at 7.75 per cent yesterday.
Banks have also started availing of funds from the Reserve Bank of India’s (RBI) marginal standing facility (MSF), which charges an interest rate of 8.5 per cent, 100 basis points (bps) more than the prevailing repo rate. According to data released by RBI today, banks secured Rs 100 crore via MSF yesterday.
The data relating to MSF is released by the central bank with one day lag. Last week, on two days, banks had availed of funds from the MSF. (LIQUIDITY UNDER STRESS)
Banks can get funds from the liquidity adjustment facility (LAF) at the repo rate by pledging government bonds if they have such papers in excess of the minimum requirement.
The statutory liquidity ratio is kept at 23 per cent, which means banks have to maintain minimum 23 per cent of their net demand and time liabilities in government papers.
Normally, if banks exhaust their excess SLR security, then they avail of MSF, which comes at a higher cost.
The use of MSF comes at a time when liquidity deficit in the system is reaching close to Rs 1.5 lakh crore yesterday — which was the highest in the current financial year. Today, banks’ borrowing from LAF hit a new high of the financial year, as they borrowed almost Rs 1.64 lakh crore.
The liquidity deficit has also made the overnight rates inching up. Data from Clearing Corp of India shows that while the call money rate touched a high of nine per cent today, the collateralised borrowing and lending obligations, or CBLO, touched a high of 9.30 per cent.
The present liquidity crunch in the system is mainly due to the lack of government spending and high demand for funds by banks to meet their year-end targets. According to some reports, the government is expected to close the year with Rs 75,000 crore cash balance with RBI.
Apart from these temporary issues, the wedge between credit and deposit growth, which is more of a structural issue, is causing the liquidity tightness. According to RBI, till March 8, year-on-year growth of bank credit was 15.4 per cent, while deposit grew 13.1 per cent.
