Borrowings by SBI leave no room for rest.
STATE BANK of India ( SBI) is said to be the big shark fishing in the troubled waters of banking liquidity, taking the overall bank borrowings from the Reserve Bank of India ( RBI) to new highs of over Rs 60,000 crore during the last few days.
Since Monday, bank withdrawals from the repo ( through which RBI lends to banks to meet overnight or short- term requirements) window shot up to over Rs 60,000 crore, from about Rs 10,000- 15,000 crore on an average during the previous week.
While some money market experts have attributed the spurt in demand to the payments due from 3G auction winners, many have rejected the argument.
A senior treasury official of a major bank, who did not wish to be named, said, " SBI has been aggressively mopping up funds from various sources over the last few days. It raised funds through short- term certificates of deposit ( CDs) and bulk deposits, including the bonds sold by Brihanmumbai Municipal Corporation ( BMC)." " For BMC bonds, SBI had offered 6.85 per cent on Wednesday, and 6.80 per cent on Thursday. This is in addition to Rs 500 crore it raised through CDs at 6.4 per cent last week," he added.
Though the market was expecting the drawals from the repo window to come down to around Rs 40,000 crore on Thursday, it ended slightly below Rs 60,000- crore mark, at Rs 59,300 crore.
Money market experts are still keeping their fingers crossed on the likely impact of advance tax payments and about Rs 30,000 crore of outgo due to payments towards broadband wireless access ( BWA) by bid winners.
Advance tax outgo is expected to be about Rs 35,000 crore ( from the banking system).
G. A. Tadas, managing director ( MD) and chief executive officer ( CEO) of IDBI Gilts, said, " However, redemption of Rs 10,000 crore worth of government securities is coming up next week. If the government is pumping in about Rs 25,000 crore, the advance tax outgo will not add to the present liquidity woes." The Centre, which had raised nearly Rs 68,000 crore through 3G auctions, will take at least 15- 20 days to bring it back into the banking system in the form of expenditure.
This is the minimum lag effect due to delays in moving notes and clearances in the government, market sources said.
While terming this liquidity crunch as short- term, A. D. M. Chavali, general manager- treasury and resource management, said the crisis would blow over by the first week of July as RBI had anticipated.
" Once the 3G money is back in the market, the liquidity situation will ease. It should happen by the first week of next month," Chavali added.
RBI had rolled out liquidity infusion measures in the form of opening up a second reverse repo and repo window, and allowing banks to borrow through the repo window to the tune of 0.5 per cent of their net demand and time liabilities ( NDTL), without attracting penalty for not maintaining the statutory liquidity ratio ( SLR) at the mandated level.
Kumar Rachapudi, analyst at Barclays Capital, said, " The government disbursement of funds is the key for systemic liquidity going forward." He estimated that the funds with the government would be Rs 5,000 crore and Rs 16,600 crore in June and July, 2010, beefing up funds availability in the banking system.
" Barring liquidity injection measures by the RBI, we estimate that the government needs to disburse/ spend about Rs 1.34trn ( Rs 1.34 lakh crore) in the next two months for systemic liquidity to remain adequate," Rachapudi added.
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