Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The recent Rs1.2trn liquidity improvement in the repo markets (end December to early
March) has been primarily driven by the Rs1.1trn decline in government cash balances over
the same period.
Government cash balances down to the minimum mandated levels
According to the Reserve Bank's latest weekly statistical supplement, central government
cash balances with the Reserve Bank had declined to the minimum mandated level of Rs1bn
for the week ended 4 March 2011, down from Rs275bn the week earlier. Government cash
balances with the Reserve Bank peaked at Rs1,062bn for the week ended 24 December
2010. As such, government cash balances have declined Rs1,061bn from their peak (this
data is available on a weekly basis). The high level of government cash balances was a key
contributor to tight liquidity, in addition to loan growth outpacing deposit growth.
Banks' net repo borrowing has declined by roughly the same amount
Net bank repo borrowing under the Liquidity Adjustment Facility (LAF) of the Reserve Bank
declined by Rs1,209bn from its peak of Rs1,705bn on 22 December 2010 to Rs496bn on 4
March 2011 (this data is available on a daily basis). Net bank repo borrowing was Rs557bn
on 11 March 2011, representing 1.1% of commercial bank deposits. These recent levels are
in line with Reserve Bank's comfort levels of the LAF being at (+/-) 1% of the net time and
demand liabilities of banks versus the 3.6% levels at the peak in late December.
Liquidity could tighten a bit with a build up in government cash balances
According to the revised estimates for FY11 in the recently published FY12 budget
documents, the government expects a net increase of Rs150bn in its cash balances for FY11
(implying a year-end cash balance of Rs189bn versus Rs39bn at the end of FY10). This
would imply an increase of Rs188bn from current levels, which could lead to some tightening
in liquidity.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The recent Rs1.2trn liquidity improvement in the repo markets (end December to early
March) has been primarily driven by the Rs1.1trn decline in government cash balances over
the same period.
Government cash balances down to the minimum mandated levels
According to the Reserve Bank's latest weekly statistical supplement, central government
cash balances with the Reserve Bank had declined to the minimum mandated level of Rs1bn
for the week ended 4 March 2011, down from Rs275bn the week earlier. Government cash
balances with the Reserve Bank peaked at Rs1,062bn for the week ended 24 December
2010. As such, government cash balances have declined Rs1,061bn from their peak (this
data is available on a weekly basis). The high level of government cash balances was a key
contributor to tight liquidity, in addition to loan growth outpacing deposit growth.
Banks' net repo borrowing has declined by roughly the same amount
Net bank repo borrowing under the Liquidity Adjustment Facility (LAF) of the Reserve Bank
declined by Rs1,209bn from its peak of Rs1,705bn on 22 December 2010 to Rs496bn on 4
March 2011 (this data is available on a daily basis). Net bank repo borrowing was Rs557bn
on 11 March 2011, representing 1.1% of commercial bank deposits. These recent levels are
in line with Reserve Bank's comfort levels of the LAF being at (+/-) 1% of the net time and
demand liabilities of banks versus the 3.6% levels at the peak in late December.
Liquidity could tighten a bit with a build up in government cash balances
According to the revised estimates for FY11 in the recently published FY12 budget
documents, the government expects a net increase of Rs150bn in its cash balances for FY11
(implying a year-end cash balance of Rs189bn versus Rs39bn at the end of FY10). This
would imply an increase of Rs188bn from current levels, which could lead to some tightening
in liquidity.
No comments:
Post a Comment