Liquidity eases as average deficit hits four-week low

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New Delhi | Published: March 12, 2019 2:55:40 AM

The net foreign portfolio investors (FPI) outflows from bond market was nearly at $1,023 million since January 1, 2019.

bank, banking sector, care rating, liquidityRBI has scheduled OMO purchase of Rs 25,000 crore in two tranches in the first fortnight of March.

The average liquidity deficit of Indian banking system for the week-ended March 8 moderated to a four-week low at Rs 30,664 crore.

The easing of liquidity deficit can be attributed to an increase in foreign inflows in domestic markets and OMO (open market operation) purchases of government securities by RBI, according to experts at Care Ratings.

In the week ended March 1, average liquidity deficit of the banking system stood at Rs 84,886 crore against an average liquidity deficit of Rs 1.3 lakh crore in the week ended February 22. The banking system net liquidity has been in deficit consecutively for 22 weeks, showed the data compiled by Care Ratings.

RBI has scheduled OMO purchase of Rs 25,000 crore in two tranches in the first fortnight of March. So far in FY19, RBI has already infused liquidity to the tune of Rs 2.87 lakh crore by way of OMO purchases.

“The easing in liquidity deficit in the banking system was expected as the government does some expenditure towards the balance payments in March. However, the deficit may again widen at the time of GST payments towards the end of this month,” said Ashish Jalan of SPA securities.

The yield on the benchmark bond maturing in 2028 rose by 8 bps since January 1, 2019 to close at 7.5120% on Monday, March 11, according to Bloomberg.

The net foreign portfolio investors (FPI) outflows from bond market was nearly at $1,023 million since January 1, 2019.

The prevalence of liquidity deficit in the banking system in the week gone by can be credited to the fund outflows to meet year-end funding requirements of businesses, the higher quantum of currency in circulations of over `21 lakh crore and the government market borrowings, said the analysts at Care Ratings.

Bank credit growth surpassed deposit growth in the previous fortnight as the non-food credit, or loans to individuals and companies, grew 14.3% year-on-year (y-o-y) during the fortnight ended February 15, while the deposits grew 10.2%, showed the RBI data.

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