In­dian bank­ing sys­tem faces ex­treme cash crunch

The Pak Banker - - Front Page -

NEW DELHI: Year 2010 is prov­ing to be a year of fund crunch for The In­dian bank­ing sys­tem is fac­ing an ex­treme fund cri­sis in 2010. Al­though the Cen­tral Bank an­nounced mea­sures to in­ject 48, 000 crore into the sys­tem, banks still had to use the repo route to raise a record of 1.59 lakh crore.

The in­ter­est rate in the call money mar­ket refers to an overnight mar­ket which is used by banks in or­der to loan or bor­row from other banks was as high as 7 per­cent. This clearly shows that the bankers have not yet be­come alert al­though they are fac­ing such a cri­sis.

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The mar­ket has been pro­vided some com­fort zone as RBI made a move so as to re­duce the low­est share level of govern­ment se­cu­ri­ties which is re­ferred to as the statu­tory liq­uid­ity ra­tio (SLR). When drawn a com­par­i­son, banks in­deed pos­sess higher sur- plus hold­ings of the govern­ment se­cu­ri­ties al­though the new floor is al­most 24 per­cent. The bankers are try­ing to bring in some dis­ci­pline in the mar­ket and plan to con­tinue with it till the month end so as to monitor the ex­tra ex­pen­di­ture that oc­curs when the govern­ment pays salaries and pen­sion.

In or­der to have an ex­act count and also to en­sure that the sys­tem con­tains ad­e­quate amount of cash,the govern­ment had low­ered its mar­ket bor­row­ing to 6,000 crore this week, from the ear­lier sched­uled 11,000 crore, to en­sure that ad­e­quate amount of cash was avail­able in the sys­tem,al­though it al­ready has a de­posit of 1 lakh crore. Ac­cord­ing to RBIs an­nounce­ment last week, it's due to pur­chase bonds of Rs 48,000 crore over the next one month.

Ever since the com­pa­nies made a pay­ment over Rs 1 lakh crore in July for use of spec­trum, liq­uid­ity has re­mained un­der strain. -PB News

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