Banks borrow Rs 5,920 cr via LAF window

The comfortable liquidity prevailing in the system is expected to continue in the near term. However, in the near-term liquidity deficit as low as Rs 5,920 crore on Thursday may not be the case under the Reserve Bank of India's (RBI) daily Liquidity Adjustment Facility (LAF).

“This week there was a holiday in between and banks  might have maintained more requirement of the Cash Reserve Ratio (CRR). But now banks are  trying to reduced that level because of the extra they might have maintained before the holiday. When they maintain lower, they require less cash. Therefore, borrowing under daily LAF came down,” said  Mohan Shenoi, president - group treasury and global markets, Kotak Mahindra Bank.

 

Last week the average borrowing by banks under daily LAF stood at Rs 71,520 crore. According to Shenoi daily LAF borrowing will be back to around  Rs 20,000-25,000 crore from next fortnight.

By December this amount may increase. “Without RBI action, the system liquidity will be in deficit mode of about Rs 60,000-70,000 crore by December end,” said Brijen Puri, executive director & head of markets, JP Morgan. According to Puri the RBI will conduct Open Market Operations (OMOs) purchase auction of gilts to take care of that.