RBI Further Extends Liquidity Support Measures (30-Nov-2010)
As the liquidity in the Indian money market continues to remain tight, the Reserve Bank of India (RBI) on Monday further extended the liquidity easing measures that it had announced late last month and also extended the scope of the special measures. Banks have continued to borrow around Rs 1 lakh crore from the central bank for nearly a month now.
It had earlier provided some liquidity measures to ease the fractional shortage in liquidity and the same have now been widened. The central bank said in a statement that scheduled commercial banks can avail of additional liquidity support under the Liquidity Adjustment Facility (LAF) to the extent of up to 2.0% of their net demand and time liabilities (NDTL) as on the reporting Friday of the second preceding fortnight. Earlier the relaxation was given to the extent of 1% of the NDTL.
Further, the RBI cleared that banks which avail this facility may seek waiver of penal interest on a fortnightly basis, purely on an ad hoc, temporary basis, for meeting any shortfall in statutory liquidity ratio (SLR). The SLR is percentage of the NDTL that a bank has to be mandatorily invest in government and other approved securities. The facility effectively means a temporary cut in SLR by 2%. The RBI has been running a second window under the LAF through which banks can access cash.
The special measures, which were first announced when liquidity came under pressure due to the festive season and Coal India IPO, were originally due to expire on December 16, around the same time that corporate sector would be paying its advance taxes, that could again exert pressure on the liquidity situation, hence making a case for extension of the measures.
The RBI had stated in its latest quarterly review that while deficit liquidity is consistent with the tightening of monetary policy, it would not like to see the deficit go beyond 1% of NDTL which works out to around Rs 50,000 crore. Since liquidity deficit has been much larger, the central bank has been forced to come out with support measures. Even though a liquidity deficit is consistent with anti-inflation stance, excessive deficit in liquidity can be disruptive both, to financial markets and to credit growth in the banking system. To ensure that economic activity is not disrupted by liquidity constraints, the liquidity deficit needs to be contained within a reasonable limit, the RBI had stated in its policy review.
Top News Today
 National Thermal Power Corporation (NTPC) will be signing the fuel supply agreements' (FSA) with Coal India for 4,300 megawatts on 2009 terms. In these FSAs companies have change trigger level, which has
 After cellular market leader Bharti Airtel launched its 4G services, now Reliance Industries is reportedly gearing up to launch the services soon and has accordingly partnered with Himachal Futuristic
 Wipro's IT, consulting and outsourcing business Wipro Technologies is likely to introduce India Gateway internship programme for UK university students in July 2012. This internship program consists of
|
International Stock News
 US markets got a good bounce back on Monday with all major indices gaining more than 1%, it was one of the best session of the month. There was some M&A activity along with report that Chinese government
 US markets declined further on Friday, making it the worst week for the markets in 2012, as the most awaited Facebook (FB) IPO was only able to muster a slight gain in its public debut, while the eurozone
 Thursday proved another bad day for the US markets with major indices losing over one to two percent as eurozone debt contagion worries continued, coupled with disappointing economy news. A read on manufacturing
|
|
|