SBI borrowing from market to tide over liquidity crunch:Bhatt

The nation's largest lender State Bank has said it is borrowing funds from the market to tide over the liquidity shortage on account of the spectrum sale and advance tax payment.

MUMBAI: The nation's largest lender State Bank has said it is borrowing funds from the market to tide over the liquidity shortage on account of the spectrum sale and advance tax payment.

The bank is still borrowing from the market, State Bank chairman O P Bhatt told reporters.

SBI, along with other private and public sector banks have been borrowing funds from the Reserve Bank and the inter-bank call money market to overcome the liquidity crunch.

To overcome liquidity crunch on account of payment towards spectrum sale, the RBI had opened a separate window on May 28 allowing banks to borrow funds from the central bank.

As per the second liquidity adjustment facility (LAF) option opened by the RBI to meet short-term cash crunch, banks borrowed Rs 28,960 crore at repo rate of 5.25 per cent yesterday. At the same time, overnight call money average rate was 4.27 per cent and Rs 176 crore was transacted under this.

Short-term liquidity crunch is created in the system as over Rs 1 lakh crore have been gone out of the system yowards payment of 3G and broadband spectrum allocation. Besides, there was the first installment of advance tax payment by India Inc on June 15.
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The Reserve bank is scheduled to come out with first quarterly review of the monetary policy on July 27 amdist double-digit inflation and tight liquidity condition.

Inflation is likely to go up further bu about 1 per cent on account of fuel price hike last week. The government on Friday last had increased the prices of petrol and diesel by Rs 3.73 and Rs 2 per litre and cooking gas by Rs 35 per cylinder respectively. While, headline inflation is hovering over 10 per cent, food inflation was 16.9 per cent for the week ended June 12.
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