| The refrain among bankers is that liquidity in the banking system looks high not because of FII inflows, but due to the cancellation of two government security auctions (for Rs 13,000 crore) in late November and a temporary postponement of the market stabilisation scheme (MSS) floatation. |
| "Of course FII inflows matter too, but not that much for the money markets now," said a senior banker. |
| In December, the average foreign portfolio inflow has been $300-800 million as against $70-200 million in November. |
| An analyst said with the RBI keen on controlling inflation, it has intervened less in the foreign exchange market, meaning there has been a reduction in the induction of rupee liquidity. |
| The RBI has allowed the rupee to rise "" it is hovering in a "comfortable" range of 98-102 in real effective exchange rate terms , and has a scope to appreciate to 43.50 per dollar, according to analysts "" in recent weeks. |
| And by default, this has helped control inflation along with sagging crude oil prices. |
| Bankers though, are divided on the medium-term liquidity outlook due to the upward pressure on interest rates. While foreign banks expect easy funds going forward, public sector bankers feel that would not be the case. |
| "Liquidity is just about adequate to match the demand and supply. The indicator of comfortable liquidity is call money rates in the corridor of 4.75-6 per cent," said G Narayanan, general manager (treasury), Bank of India. |
| Surendra Rosha, head of forex sales, HSBC, said there has been some tightening in the liquidity in the short term due to advance tax flows. However, he added that liquidity is expected to be comfortable down the line. |
| Partha Mukherjee, head of treasury at UTI Bank, said, "Credit growth and increased government spending will remain critical to liquidity assessment." |
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