Potential liquidity available: RBI

Potential liquidity available: RBI

Mumbai: Indian banks have potential liquidity available in the system, a Reserve Bank of India (RBI) deputy governor Shyamala Gopinath said on Monday, indicating that further cash easing steps were not likely any time soon.

Gopinath said the interbank call money rate has not shot up sharply, implying that there is no panic over liquidity among banks.

“One should not just look at the amount (of repo borrowing) but also call money, whether it has gone substantially up like it used to be in the past -- June, July. That has not been the case. There has been no panic at all," Gopinath said on the sidelines of an event.

Bond and swap rates did not react to the comments, with the market not expecting liquidity-easing measures immediately.

However, hopes remained for more steps around mid-December -- when additional cash moves out of the system towards advance tax payments.

“It seems it is unlikely that any incremental measures will be taken now," said Nirav Dalal, managing director and country head of fixed income, debt capital markets at Yes Bank.

If the government spends in December then the liquidity deficit may reduce and the market may not need any more measures, Dalal said, adding that in the absence of sufficient expenditure, the RBI may have to take more measures next month.

The benchmark 10-year bond yield remained unchanged at 8.01% after Gopinath’s comments, and down 2 basis points on the day.

The one-year overnight indexed swap was at 6.71%, unchanged from Friday’s close, while the benchmark five-year swap was down 3 basis points at 7.21%.

The RBI had reintroduced twin liquidity adjustment facilities and relaxed statutory liquidity ratio (SLR) on 9 November.

The call rate, which had touched a two-year high of 12% on 29 October, had cooled off later that day to 6.60 to 70% after the RBI announced its first set of cash easing measures. The interbank cash rate is at 6.80 to 6.90%.

Banks have been borrowing on an average $22 billion from the central bank’s repo window daily since mid-October, compared with around Rs70,000 crore before that. “We are monitoring the liquidity situation. We have provided two facilities to banks. One is second LAF (liquidity adjustment facility), second one percent below SLR. So there is potential liquidity available in the market," Gopinath added.