Mumbai : The Reserve Bank’s move to implement incremental cash reserve ratio to absorb excess liquidity in the system is putting strain on the banks and there is a need to adopt non-disruptive mode of liquidity absorption, says a report.
In order to manage liquidity condition post demonetisation, the RBI on November 28 had asked banks to maintain an incremental CRR of 100 per cent on deposits accrued between September 16, 2016 and November 11, 2016. “Due to incremental CRR, for the accretion of Rs 3.76 lakh crore in deposits, banks have to maintain Rs 4.69 lakh crore in regulatory ratios. Apart from this, banks will have to maintain 70 per cent LCR (liquidity coverage ratio) depending upon the category of the incremental liability,” SBI said in its internal report Ecowrap on Monday. The report estimate indicates that between Nov 10 to Dec 30, 2016, at 85 per cent withdrawal rate, the deposits that will be kept with banks will be Rs 1,94,200 crore.
After factoring in the regulatory requirements, the net liquidity that will remain in the system will be Rs 1,46,100 crore. “Of this, even if we assume a trend credit growth, and Rs 42,000 crore of auction of government securities (g-secs) in December 2016, with the ceiling of Rs 600,000 crore under MSS (Market Stabilisation Scheme), the RBI can thus easily absorb the excess liquidity from market,” the report said.
