Borrowing by banks under Liquidity Adjustment Facility eases

Banks borrowed Rs 86,675 cr under LAF today as compared to average borrowing of Rs 92,820 cr in the last one month

The liquidity condition eased today after the Reserve Bank of India (RBI) on Thursday announced Open Market Operations (OMOs) purchase of gilts worth Rs 12,000 crore on December 4. Banks borrowed Rs 86,675 crore under the RBI's Liquidity Adjustment Facility (LAF) today compared with an average borrowing of Rs 92,820 crore in the last one month. Even on Thursday bank had borrowed Rs 1,018.80 crore under daily LAF.

However, the impact of OMO may not last longer as we get closer to December 15, the third instalment of corporate advance tax outflow deadline. As per the market estimates, the liquidity stain due to advance tax payment will be in the range of Rs 50,000-60,000 crore. At that time, borrowing by banks under daily LAF will again rise above Rs 1,00,000 crore, said bankers.

 

Due to this, the street feels the RBI should conduct more OMOs in the weeks ahead.