Banks on Thursday parked Rs 71,520 crore with the Reserve Bank of India (RBI) through the reverse repo route, which is used to suck out excess liquidity from the system.
While liquidity remained abundant, funds parked with the central bank on Thursday through the reverse repo window was the lowest in nearly six months. Since April, banks were depositing over Rs 1,00,000 crore on a daily basis with the central bank. But since September 17, there have been only three occasions, including on Thursday, when the level has dropped below the Rs 1,00,000-crore level.
Dealers said that the payment of the second installment of advance tax was one of the reasons for the lower parking of funds. In addition, there were signs of higher credit flow in recent weeks as banks were trying to push loans to meet quarter-end targets.
Further, with the festival season currently on, bank customers were also withdrawing higher amount of cash to meet their spending needs, said a banker.
Despite the drop in the use of reverse repo, there has been no pressure on the overnight call money rate. According to Clearing Corporation of India data, call rate hovered between 1.75 per cent and 3.35 per cent on Thursday. The weighted average was 3.26 per cent, at the same level as yesterday.
Bankers said that there was more demand for loans. With Eid and Navratras, there was a healthy demand for consumer and auto loans. In the coming weeks, as consumers step up purchase of durables ahead of Diwali, demand for loans would also rise, they added.
“The demand from the infrastructure sector is very strong and we expect it to pick up further with the thrust being given to the national highways programme,” said a bank chief.
In addition, some of the private sector players, which had been missing from the market fearing delinquencies are beginning to claw their way back into the market.
During the first fortnight of September, bank credit flow increased by over Rs 18,374 crore, though the overall growth during the year up to September 11 fell to 13.24 per cent.
