RBI extends special liquidity measures till Jan 28
The Reserve Bank extended its special measures for easing the monetary supply till January 28 in view of a cash crunch due to a slew of public stake sales and brisk credit offtake during the festive season.business Updated: Nov 29, 2010 23:02 IST
The Reserve Bank extended its special measures for easing the monetary supply till January 28 in view of a cash crunch due to a slew of public stake sales and brisk credit offtake during the festive season.
The special measures, which were announced when liquidity came under pressure due to the festive season and Coal India IPO, were originally due to expire on December 16, around the same time that corporates would pay their advance taxes, which will exert further pressure on the liquidity situation.
The RBI's special measures enable banks to avail 2% more funds through the liquidity adjustment facility (LAF), based on their deposits.
Scheduled commercial banks may avail of additional liquidity support under LAF to the extent of up to 2% of their net demand and time liabilities (NDTL) as on the reporting Friday of the second preceding fortnight, RBI said in a statement.
"For any shortfall in Statutory Liquidity Ratio (SLR) maintenance up to January 28, 2011, arising out of availment of this facility, banks may seek waiver of penal interest on a fortnightly basis, purely as an ad hoc, temporary measure," it said.
The liquidity support availed under this facility would, however, need to be reported on a daily basis, it said.
Besides, special LAF auctions will be conducted at 4.30 pm every day till January 28, 2011, it said.
The above measures are purely ad hoc, temporary and will be in force till January 28, 2011, it added.
Liquidity is likely to be tight in the coming weeks, as there are a slew of IPOs lined up and credit offtake is likely to pick up.
While manganese ore company MOIL's IPO is open for subscription, Shipping Corporation's FPO will open tomorrow. Both IPOs are expected to raise around Rs 1,200 crore each.
Around Rs 22,000 crore has been mopped up from public offers of state-run companies so far this year.
The tight cash position in the system can be gauged from the fact that banks have borrowed over Rs 1 lakh crore through the liquidity adjustment facility of the RBI since November 8.
Analysts said liquidity pressure is likely to ease when the government enhances spending, based on second supplementary demands for grants.
The government has sought to enhance the spending target for the 2010-11 financial year to a gross 45,000 crore, implying a Rs 20,000 crore additional net cash outgo compared to the original Budget estimate.