Surplus liquidity takes a dip in Aug

MUMBAI: Surplus liquidity with banks has ebbed to around Rs 30,000 crore in August, down from an average of Rs 50,000 crore in Q1 ’06-07, as the government borrowed more and spent less. The Reserve Bank of India’s move to get banks make all high-value payments on a real-time basis is also expected to put pressure on liquidity.

Surplus money is reflected in the size of funds banks lend to RBI every day through reverse repo transactions. In the first quarter, average amounts parked with RBI under the daily reverse repo was around Rs 50,000 crore. This was the period when government spending on several programmes was also high at Rs 1,31,470 crore, compared to Rs 93,584 crore expended in the corresponding period of the previous fiscal.

What has changed in August was that the government borrowed Rs 12,500 crore in the first week itself even as there was a slowdown in government spending as compared to the first quarter of the current financial year.

Bankers feel that RBI’s recent move asking banks to make high-value payments through their Real Time Gross Settlement (RTGS) account on a gross basis could also trigger a decline in surplus liquidity. This is because earlier banks could net out payments by paying out only the difference between their receipts and payments.

Now under RTGS, the money leaves their accounts during the course of the day and banks have to ensure that there are enough funds for each payout. Besides, another Rs 8,000 crore auction of government securities will drain the market further. Banks typically maintain two types of accounts with the central bank, one- the real time gross settlement (RTGS) account and the current account.

Till last week, all transactions involving the National Clearing Cell and the Clearing Corporation of India were being cleared by the RBI through the current account on a net basis.

As per the latest circular issued by the RBI, from now on, these transactions will be cleared in two or three batches during the day on a gross basis, thus causing a fund outflow. In this context, the RBI has now instructed banks to maintain sufficient funds in their RTGS accounts.

A senior official from the Reserve Bank of India said, “the implementation of this new platform has affected liquidity in the system due to the initial teething troubles, but these are expected to ease with time.” This system has gone live since August 12 and is part of the central bank’s efforts to enforce seamless integration of transactions into a single platform.

These include transactions such as national electronic fund transfer (NEFT) and the electronic clearing service (ECS) and high-value retail transactions within the NCC platform and under CCIL, the transactions involving multilateral net settlement batches, collateralised lending and borrowing obligations (CBLO), transfers of foreign exchange, ATMs and other securities.

In case of a non-availability of funds in the RTGS account, the system has been tuned in to generate a message, urging banks to transfer the required funds from the current account into the RTGS account, informed a public sector banker.