Though the amount of funds banks park with the Reserve Bank of India (RBI) has fallen, the special measure by Reserve Bank of India(RBI) to provide liquidity through a second LAF, which opened on 28 May, has not been used by the banks.
Banks on Friday parked over Rs 5,705 crore, indicating a fall in liquidity in the system as they were parking an average of Rs 35,000 crore a fortnight ago.
The yield on the 7.8% bond maturing in 2020 rose by 17 basis points this week to 7.55%. It had closed at 7.52% on Wednesday. Markets were closed on Thursday for a public holiday.
The fact that yields have moved up marginally instead of falling indicate about a possiblity of liquidity crunch going ahead.
Bankers had apprehended an outflow of over Rs 67,000 on account of payment toward 3G services, in addition to advancement payment of corporate taxes, will put pressure on liquidity.
However, RBI had acted proactively by announcing special liquidity measures on Wednesday to manage the liquidity situation arising out of the large outflow of funds from the system for meeting the payment requirements on account of auctioning of the 3G telecom spectrum licences and the ongoing auctioning of broad band wireless spectrum.
The central bank had allowed scheduled commercial banks to reduce their SLR holding?currently fixed at 25%?by 0.5 % on an ad hoc, temporary measure. The central bank allowed second LAF in the afternoon so that banks can raise funds conveniently These measures will remain effective from May 28 to July 2,
The domestic banking industry expected that RBI’s move to infuse liquidity in the system by special measures can create headroom for Rs 20,000 crore and will have a positive impact on liquidity and interest rate scenario in the system.
KR Kamath, chairman & managing director , Punjab National Bank (PNB), said RBI has given a clear-cut signal that there will be no dearth of liquidity whenever there was requirement for the same.
?In my bank?s case, we still have got surplus liquidity worth Rs 7,000-8,000 crore. Yes, there was some kind of pressure on banks due to the financing of 3G auction and the forthcoming payment schedule of advance tax.?