Liquidity Crunch

Banks bid 4.5x in Thursday's auction

NSE Clearing Ltd, the clearing house of the National Stock Exchange (NSE), has failed to meet the capital markets regulator Sebi's mandated liquidity requirements, citing the non-payment of dues by rival BSE as the primary reason for the shortfall. In its December 2024 quarterly results, NSE Clearing, the exchange's unit responsible for clearing and settling its trades, reported a shortfall of Rs 176.65 crore in its minimum liquid assets. The company informed Sebi in a letter dated January 9 that this deficit was primarily due to the non-receipt of Rs 312.37 crore in dues from BSE. An NSE Clearing spokesperson said its auditors flagged the outstanding payment issue in their third-quarter financial review. The outstanding amount pertains to "interoperability arrangements", the official said. "The company is yet to receive outstanding dues of over Rs 300 crore from BSE Ltd. NSE Clearing is communicating with BSE on this matter," the spokesperson added. The Securities and Exchange B

The cash injection has also led to a decline in the weighted average call rate, which represents banks' overnight borrowing costs

This reduction in the CRR released primary liquidity of approximately Rs 1.16 trillion into the banking system

"Banks are neither sanctioning new lines (of credit) nor disbursing from already sanctioned limits," the official at the company, who did not want to be named, said

Liquidity may not improve immediately as tax outflows of around Rs 1.25 trn are scheduled in March, says one expert

Investors have favoured longer-tenure government bonds, or g-secs, with insurance companies and pension funds leading the charge by stocking up on those with maturities of 30 years and more

Banks parked Rs 18,750 crore at the auction against a notified amount of Rs 50,000 crore at a weighted average rate of 6.49 per cent

The liquidity drought may be deliberate. Unlike Beijing, New Delhi has every reason to be sanguine about growth

In the preceding VRR auctions, the central bank received a significant response, with banks submitting bids ranging between 2.5 to 3.2 times the bidding amounts due to tight liquidity conditions

The deficit liquidity in the banking system widened to Rs 2.7 trillion on Thursday, according to data by the central bank

"The estimates are that around Rs 90,000 crore to Rs 1 trillion will go out as goods and services tax (GST) outflow," a dealer at a primary dealership said

Banking system liquidity went in surplus mode on Thursday after being in deficit for three days

RBI's August monetary policy review asked banks to maintain an incremental cash reserve ratio of 10%

Corporates have traditionally preferred raising funds via private placements due to its ease, shorter execution time, and lower costs overall

Credit demand at decadal highs and liquidity remains significantly downsized, says research

Persistently weak liquidity, high refinancing needs triggers rating action

Start-ups manufacturing electric two- and three-wheelers have alleged they are not getting subsidies under the second phase of the FAME II scheme

In a Q&A, Anirudha Taparia says investors should not be swayed by market momentum, and must find deep value by identifying robust long-term themes available at compelling valuations

Experts say banks are still hesitant to lend to producers as there is no collateral