Liquidity overhang largely due to capital inflows: RBI

Written by Banking Bureau | Mumbai, Oct 29 | Updated: Oct 30 2007, 05:27am hrs
Liquidity conditions continued to be influenced by movements in capital flows and cash balances of the governments, the Reserve Bank of India (RBI), in its ocument, Macroeconomic and Monetary Developments: Mid-Term Review 2007-08, said on Monday.

Growth in broad money (M3), year-on-year (y-o-y), was 21.8% at Rs 6,41,464 crore on October 12, 2007 as compared with 18.9% at Rs 4,66,603 crore, a year ago.

Aggregate deposits of banks, y-o-y, increased by 23.4% Rs.5,83,198 crore on October 12, 2007 as compared with 19.2% at Rs. 4,01,717 crore.

The RBI modulated market liquidity with the help of issuances of securities under the Market Stabilisation Scheme (MSS), operations under Liquidity Adjustment Facility (LAF) and increase in the cash reserve ratio (CRR).

In the foreign exchange market, the rupee generally appreciated against major currencies. Yields in the Government securities market softened. Banks deposit and lending rates softened too.

Global uncertainties over the distribution of losses arising out of the US sub prime mortgage market during the second quarter of the current fiscal has however, not affected emerging markets, the RBI said.

Emerging market economies have generally been less affected by developments in the advanced economies and Indian financial markets remained orderly for most part of the quarter, the report said.