Banks on Thursday borrowed around Rs 8,000 crore, much less than what they had raised from the Reserve Bank of India (RBI) on Wednesday. On Tuesday, they had withdrawn Rs 5,575 crore from RBI.
Banks had parked Rs 1200 crore in both the liquidity adjustment auctions (LAFs) with RBI earning 3.75% on Thursday. Call rates hovered around 5.3% and volume of funds transacted were around Rs 4,500 crore. Rates of short-term money market instruments fell 20 basis points as investors purchased papers on the view that liquidity would not tighten further, dealers said. While three-month certificate of deposits (CDs) were quoted at 5.8-5.95%, as against 6-6.2% on Wednesday, three-month commercial papers (Cps) were quoted at 6.05-6.25% compared with Wednesday?s 6.2-6.4%. One-year CDs were quoted at 6.55-6.75%, as against 6.65-6.85%.
On Thursday, State Bank of Hyderabad placed one-year CDs at 6.5%, compared with State Bank of Mysore?s 6.7% on Wednesday. ?The liquidity in the system is not tight but it is just sufficient. There is also expectation that the liquidity in the system would not tighten further. Credit off take is also not there so the surplus liquidity in the system is parked in liquid schemes,? said a dealer with a state-owned bank.
According to dealers, the outflow towards corporate advance taxes would not put much pressure on the liquidity. Around Rs 30,000 crore will move out of the banking system by June 15 towards the first installment of corporate advance tax. ?There are investors in the market as the amount of money that moved out of the system was lesser than what the market had expected,? said a dealer with a bank. Some of the banks, which raised funds through CDs, are State Bank of Hyderabad (one-year CDs at 6.50% for Rs 235 crore), State Bank of Patiala (at 6.5% for Rs 200 crore ), IDBI Bank (at 6.65% for Rs 465 crore) and Canara Bank (at 6.50% for Rs 150 crore ).