Central bank is issuing the largest reverse repo – in the current
fiscal year –worth Rs 19.5 billion tomorrow to mop up excess liquidity from the
banks and financial institutions – that will help contain
inflationary pressure.
Unlike earlier five reverse repo of seven-day, it will be a 14-day
reverse repo that is expected to mob up Rs 19.5 billion for two weeks.
According to the commercial banks, they have some Rs 65 billion surplus
liquidity that has not been utilised due to low credit demand, also due to CA
election that might have brought more liquidity into the banking channel.
Earlier, the central bank has mopped up some Rs 45 billion in the
current fiscal year 2013-14 in various dates, except Rs 8.5 billion outright
purchase auction for securities. But reverse repo is the short-term instrument
to mob up excess liquidity from the banks and financial institutions. The central
bank accepts deposits from banks against the collateral of securities with the
central bank at a certain rate.
Due to excess liquidity in
the banking channel – that is expected to fuel inflation and speculation in
stock market – the short-term weighted interest rate of 91-day Treasury Bills
dropped to 0.0164 per cent on November 26.
2 comments:
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