Advance tax outflows worth Rs 80,000 - 90,000 crore, coupled with year-end pressures to shore up their books, forced banks to borrow up to Rs 94,250 crore from the Reserve Bank of India on the first day after the reporting Friday. Banks are always looking at strengthening their balance sheets during this time of the year by shoring up their deposits and credit figures.
This requires them to build up regulatory reserve requirements. Banks have to park a portion of the deposits they raise as cash with the central bank. As deposits gather pace, the cash requirements also go up, requiring them to raise funds from the market to meet the shortfall. Liquidity had begun to ease in the system after the government started spending, which is reflected in the government balances with RBI at minimum Rs 101 crore.
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