Indian banks are likely to face further tightness in cash conditions next month as the second round of advance taxes are paid by companies, but the situation is expected to ease by the end of September on government spending, investors and analysts said.
Banks are already reeling under a cash crunch, following more than 1 trillion rupees of payments towards telecom spectrum, while higher rates amid rising inflation has led to expectations that the central bank may not act to ease it.
Short-term rates, which are driven by liquidity, are already rising on expectation of tightness coming up and are expected to extend their rise till mid-September, traders said.
Currently, banks are borrowing around 100 billion rupees from the central bank's repo window in August which may go up to around 500 billion rupees in September following the advance tax payments.
However, the pace of government spending will be the key to ease liquidity crunch given the onset of festive season in October.
+1.jpg)
0 comments
Post a Comment