The bankers do not see too much liquidity pressure in the face of an expected Rs 1-lakh-crore cash outgo due to the huge 3G licence fees, and advance tax payment, even as the Reserve Bank allowed lenders to borrow more funds from it through a new window.
"It is a pre-emptive measure by the central bank to ease any perceived liquidity pressure," State Bank of India chief finance officer S S Ranjan told PTI today.
Liquidity is adequate and the steps announced by the RBI are to provide comfortable availability of cash to the banks, Ranjan said.
Echoing similar view, Bank of Maharashtra chairman and managing director Allen CA Pereira said such measures would provide cofort level to the banks. At this point, the banking system is flushed with funds and credit off-take is also low. So, there is no apprehension in the market, he said.
The central bank, had yesterday, opened another window, the second liquidity adjustment facility (SLAF) which will be conducted on a daily basis up to July 2, 2010. The SLAF will be conducted between 4pm and 4.30pm.
At present, RBI offers only one such window to banks between 9.30 am and 10.30 am everyday to lend or borrow from it against government securities.
The apex bank manages daily money supply in the system through LAF. If banks surrenders government securities to borrow from RBI under SLAF, and in the process its holding of such papers come under the stipulated amount, the banks would also not be charged penal interest.
Currently, banks have to hold 25 per cent of its deposits in government securities, gold or cash to meet the stipulated requirement, technically called statutory liquidity ratio (SLR). As such, indirectly banks are given freedom to have SLR at 24.5 per cent, a 0.5 per cent reduction from the present requirement.
The second window may inject over Rs 20,000 crore--0.5 per cent of the total bank deposits of about Rs 45 lakh crore at present. Most of the banks would be having SLR in between 27-28 per cent, Pereira said, adding banks already have some headroom even over the current SLR.
Crisil principal economist DK Joshi said the RBI measures are aimed at easing liquidity, although there would not be much pressure on the banks.
"I feel liquidity is quite comfortable, nevertheless the facility would help the banks to tide over temporary problem," Punjab and Sind Bank chairman and managing director G S Vedi said.
However, Bank of Baroda executive director R K Bakshi said banks face liquidity pressure on account of the huge 3G spectrum licence fees and advance tax payouts to the government by telco and other companies.
"Liquidity has really become tight in the last few days. 3G auction taking double the amount than what was expected earlier will put pressure on liquidity...The RBI step will definitely help."
The second LAF window is importance since banks towards the close of the day would know exactly how much is their actual demand for cash after taking money from each other from the call money market.
Currently, the repo rate, which is the short-term lending rate of RBI, is 5.25 per cent and LAF auction takes place at the repo rate.
The fiercely competitive auction of 3G spectrum, which ended last week, offers Rs 67,719 crore to the exchequer, almost double of the Rs 35,000-crore projected in the budget.
This together with payments for broadband wireless access and expected advance tax for the first quarter of this fiscal may result in Rs 1 lakh crore outgo from the system.
"The latest assessment of liquidity conditions suggests that there could be temporary liquidity pressures in the market largely due to changes in government balances on account of advance tax payments and 3G auctions," RBI said in statement.
SBI chairman OP Bhatt had also admitted that surplus liquidity is gradually disappearing from the system that has forced it to raise certain segments of short-term corporate loans by 0.25-0.50 per cent.
However, Bhatt indicated that there would not be general interest rates hike immediately as liquidity is enough despite expected payment for 3G auction and upcoming advance tax.
