Banks borrow nearly Rs 80K cr from repo windows on tax outflows
Liquidity conditions to tighten over tax spillover, GST collections

Banks and financial institutions borrowed nearly Rs 80,000 crore from the Reserve Bank of India’s various repo windows, its first time in over a year, on tax-related outflows, money market dealers said.

“We expect liquidity conditions to tighten further amidst spillover from advance tax outflows and GST tax collections expected this week, as inflows from coupons, net T-bill redemption and debt buyback will only partly offset the outflows,” Kotak Mahindra Bank said in a report, on Monday.

RBI had rejected all bids received at the repurchase of two bonds total Rs 20,000 crore earlier.

Surplus liquidity fell to Rs 10,000-33,000 crore  on Monday from Rs 1.20 lakh crore  on December 8. Most of the fall in liquidity can be attributed to outflows due to third-quarter advance tax payments by December 15-16 amidst indirect tax payments on December 7-8.

This is in contrast to the surplus liquidity of around Rs 5-6 lakh crore in January, following the demonetisation of higher currency notes on November 8, which saw an inflow of Rs 15.28 lakh crore worth of deposits into the banking system.

Intra-day liquidity may remain negative for a while, which will witness more borrowing from the repo window. Also, the overall liquidity will be tighter this week on account of GST outflow following advance tax payments,” Devang Shah, senior fund manager –fixed income, Axis Mutual Fund, told TickerNews.

Banks and financial institutions borrowed Rs 30,004 crore and Rs 25,609 crore, respectively, from the two overnight variable rate repo auction worth Rs 30,000 crore each, held earlier Monday.

This borrowing is up and above Rs 24,042 crore from the overnight fixed rate repo operations under Liquidity Adjustment Facility, data taken from the RBI website showed on Monday.

This means on Monday, banks borrowed a total of Rs 79,655 crore from RBI’s various types of repo windows.

Reflecting the shrinking liquidity surplus, the central bank has refrained from conducting reverse repo auctions of various maturities for the past two days.

“Intra-day banking liquidity fell to a deficit of around Rs 21,000 crore owing to lower inflows from a reversal of earlier auctioned reverse repo auctions compared to outflows from earlier auctioned repo auctions,” a money market dealer with a private-sector bank said.

One-day call money touched an intra-day high of 6.30 per cent and ended at 6.05 per cent on Monday compared to Friday’s close of 6.25 per cent.

— TickerNews Service