Borrowings by banks under Reserve Bank of India's (RBI) daily Liquidity Adjustment Facility (LAF) continues to be high despite the Open Market Operations (OMOs) purchase of gilts by the central bank. In the last one month, the daily average borrowing under LAF stood at over Rs 1,00,000 crore. This level is far above the RBI's comfort zone of +/- 1% of banks’ Net Demand and Time Liabilities (NDTL).
On Tuesday, banks borrowed Rs 1,50,230 crore under the 1-day repo auction. “As long as government spending is not happening, liquidity condition will be tight,” said Mohan Shenoi, president - group treasury and global markets, Kotak Mahindra Bank.
The RBI has been announcing OMOs every week but there are also gilts auction every week due to which the impact is getting nullified.
The RBI has conducted four OMOs last month to comfort the liquidity. The RBI infused Rs 39,057.13 crore by way of OMOs in December. The RBI also announced another OMO worth Rs 8,000 crore on Friday.