RBI plans to inspect deposits

The Reserve Bank of India (RBI) is proposing to inspect the fortnightly reports on deposits filed by banks to check if there is any manipulation of figures.

A few banks have been caught by the RBI for manipulating the deposit figures to skirt maintenance of the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) on a part of their liabilities.

RBI guidelines require banks to maintain 5 per cent of the net demand and time liabilities with the RBI as CRR and another 25 per cent as SLR in the form of investments in government securities. So, by showing a lower deposit level, banks can bring down their CRR and SLR requirements.

"There could be stray cases (of showing depressed deposit figures) as the banks are under pressure. Their access to resource is limited but the credit portfolio has been growing at a very fast pace," said a source.

Banking sources said the fortnightly reports filed by banks on alternate Fridays "" known as reporting Fridays "" will be opened as part of "off-site inspection".

Based on the results of the off-site inspection, a decision on conducting on-site inspection will be taken. If found guilty, banks run the risk of facing penalty. Recently, the RBI has penalised a string of banks for irregularities in maintaining the know your customers (KYC) norms.

Banks have been making noises on liquidity crunch and the want the RBI to take measures to inject liquidity into the banking system, including a cut in CRR.

The credit-deposit ratio of the scheduled commercial banks as on March 3 was 71.20 per cent. Bank credit in the current year up to March 3 has increased by Rs 3,46,329 crore (32.3 per cent) against a Rs 2,90,048 crore (17 per cent) rise in deposits.

The tightness in liquidity has led to banks raising funds through short-term instruments like certificate of deposits (CDs) at very high rates. CDs of six months to one year maturity are commanding a rate of 9.5-9.75 per cent.

Night repo on March 31

On an overdrive to ease the pressure on liquidity, the RBI will conduct a "night repo" on March 31, the last working day of the financial year which also happens to be a reporting Friday.

The night repo will help banks bridge any liquidity gap they might come across as they close their books for the year.

It will also reduce their dependence on the call money market which normally becomes very tight and rates rise on the last day of the financial year.

The RBI injects funds into the system through the repo window at 6.5 per cent and mops up excess funds through the reverse repo route at 5.5 per cent.