Banks are borrowing insane amounts from the RBI, but there is no liquidity problem. If there was a liquidity issue, we would be seeing rate spikes in the overnight CALL and CBLO markets, where the spikes are relatively low. Here’s the short term borrowing by banks from the RBI. A quick note: Fixed rate repo is overnight borrowing at 6.75% Variable rate repo is borrowing for specific terms, at rates that are discovered in an auction. (The average rate is on the right most side) There are multiple such variable rate repos, so we should add them up Eventually we subtract the reverse repo, which is where banks park excess money back with the RBI. So in total, banks have borrowed about 268,000 cr. or 2.68 trillion rupees from the RBI. Reverse Repo is 25,666 cr. or around 256 billion, so if you net that out, we get 2.43 trillion. (I’m going to switch to “trillion” as it’s easier to understand with large numbers.… (Read On…)
[via Capital Mind]
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