Skip to main content

RBI to infuse Rs 1 trn into banking system via special auctions in March

By
RBI to infuse Rs 1 trn into banking system via special auctions in March
Higher tax outgo will fuel cash demand by banks, corporate sectors
The Reserve Bank of India (RBI) will infuse up to Rs 1 trillion into the banking system through special auctions this month to manage additional demand for liquidity as activities of banks and corporate entities pick pace before the close of the financial year.The current financial year (2017-18) ends on March 31.
Treasury executives said liquidity in the system has been under pressure, with supply falling short of demand on some days. The RBI has maintained its stance to keep liquidity close to neutral.The announcement to conduct special auctions to inject additional resources into the system to tackle the changing situation — high activity and outgo on account of tax payments — will give respite to the market, and prevent any sharp rise in short-term interest rates.
Last month, the RBI had indicated that it was prepared to inject adequate additional liquidity, using a combination of appropriate instruments, while continuing with its normal liquidity adjustment facility (LAF) operations.On Monday, the RBI in a statement said after reviewing the current and evolving liquidity conditions in the banking system, it had been decided to conduct “additional variable rate repo operations” for longer tenors to provide additional liquidity support to the banks in March.
It will conduct four variable-rate term repo auctions in March 2018. The amount in each auction would be Rs 250 billion.These auctions will be conducted in addition to the regular 14-day variable rate term repo auctions, the RBI added.The outgo on account income and corporate taxes by the middle of the month will create pressures on liquidity. This is last tranche for 2017-18, and the quantum of money going into government coffers will be considerably higher than in the previous three quarters.
Karthik Srinivasan, group head, Icra, said the proposed injection of additional liquidity should help cap the short-term rates and also help in lowering rate volatilities for the rest of the month.The additional amount infused through auction and money coming into the market on maturity of securities issued earlier would be adequate to meet demands, said Ananth Narayan, ‎associate professor, ‎S P Jain Institute of Management and Research.
On February 15, the RBI had said while the system liquidity was currently in surplus, it was moving steadily towards neutrality. The central bank would inject extra liquidity to address additional demand due to increase in currency in circulation, advance tax payments by corporate entities, and provide flexibility to banks in its liquidity management towards March-end.
As a special case, standalone primary dealers will be allowed to participate, along with other eligible participants in the last regular term-repo auction of the current financial year. The date for the last auction will be March 28.
The Business Standard, New Delhi, 06th March 2018

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more