Liquidity Very Tight: Repo at 199K cr.

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Repo overnight borrowing is now nearly Rs. 2 trillion (200,000 cr.), which is 3% of “Net Demand and Time Liabilities” (which at last note was about 64 trillion). The RBI comfort level is 1% of NDTL.

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This is the highest Repo figure ever, but then remember that NDTL keeps going up. Repo is what is borrowed by giving g-secs as collateral. If a bank has no such collateral, it can borrow using the MSF, where they pay 9.5% a year (under current rates). No one usually borrows at MSF unless they are desperate. In the last three week or so, even the MSF has been used – upto 10,000 cr. (100 bn) – to do additional overnight borrowing.

Update: Dheeraj Singh points out that the net borrowing is still Rs. 1.64 trillion (lakh cr). with 35,000 cr. (350 bn) deposited back to the RBI in reverse repo. This brings down the fear but these numbers are pretty high right now.

Liquidity is very tight. RBI is likely to announce more OMOs, and with the rupee sinking beyond 51 again, it’s likely they will  sell dollars and will need to have OMOs just to counter that impact. Keep watching!

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6 COMMENTS

  1. Deepak,

    Agreed, the repo borrowing is large. However, the 199k figure is a bit misleading.

    You have obviously added the repo figures for the 4 day repo on Mar 30 (197k cr) and 3 day repo on Mar 31 (2k cr). However, you also need to adjust for the large 35.6k crores that banks dumped on RBI in reverse repo on Mar 31.

    Net of that, the actual borrowing is significantly lower at about 164k crores.

  2. Hey Deepak,

    Just a question.

    Where did you get the 72 trn NDTL figure from?

    If I look at RBI’s Weekly Statistical Supplement I see that it is only ~ 64 trn (as on March 9, of course). Have they published updated figures somewhere else?

    • My bad – it should be around 64 trn itself. I calculated from the 0.75% CRR cut that RBI had said would release 48,000 cr. but got the calcualtion all wrong :) 64 trn and 3% of NDTL it is…

    • Without wishing away a genuine problem (that of a soaring current account deficit) I think that the chart (drawn the way it is) overdramatises the issue.

      One, it’s a chart drawn on an absolute scale. Two, it’s drawn going back to the 1950s.

      Any chart drawn in such a way is bound to look dramatic. A more realistic way to visualise current account deficit’s is as a proportion of GDP. A chart drawn that way would be only half as dramatic. But then it wouldn’t draw traffic, isnt it? :-)

      Plus, the other chart seems to portray our merchendise exports growing in excess of 30% for most of the recent months (with some months recording a growth of 70%). I’ll take this with a pinch of salt, partly because I know that the other data displayed (the index of industrial production) is all bunkum.

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