Apart from demutualisation, the Exchange needs to increase its workforce, replace the existing open outcry system with online screen-based trading and have delivery centres across the country for various commodities
Liquidity is adequate and the steps announced by the RBI are to provide comfortable availability of cash to banks, SBI’s chief financial officer SS Ranjan said
Bankers do not see too much liquidity pressure in the face of an expected Rs1 lakh-crore cash outgo due to the huge third generation (3G) licence fees and advance tax payment, even as the Reserve Bank of India (RBI) allowed lenders to borrow more funds from it through a new window, reports PTI.
"It is a pre-emptive measure by the central bank to ease any perceived liquidity pressure," State Bank of India (SBI) chief financial officer S S Ranjan told PTI today.
Liquidity is adequate and the steps announced by the RBI are to provide comfortable availability of cash to the banks, Mr Ranjan said.
Echoing similar view, Bank of Maharashtra (BoM) chairman and managing director Allen C A Pereira said such measures would provide comfort level to the banks. At this point, the banking system is flushed with funds and credit off-take is also low. So, there is no apprehension in the market, he said.
The central bank, had yesterday, opened another window, the second liquidity adjustment facility (SLAF) which will be conducted on a daily basis up to 2 July 2010. The SLAF will be conducted between 4 pm and 4.30 pm.
At present, RBI offers only one such window to banks between 9.30 am and 10.30 am everyday to lend or borrow from it against government securities.
The apex bank manages daily money supply in the system through LAF. If a bank surrenders government securities to borrow from RBI under SLAF, and in the process its holding of such papers come under the stipulated amount, the banks would also not be charged penal interest.
Currently, banks have to hold 25% of its deposits in government securities, gold or cash to meet the stipulated requirement, technically called statutory liquidity ratio (SLR). As such, indirectly banks are given freedom to have SLR at 24.5%, a 0.5 per cent reduction from the present requirement.
The second window may inject over Rs20,000 crore-0.5% of the total bank deposits of about Rs45 lakh crore at present. Most of the banks would be having SLR in between 27%-28%, Mr Pereira said, adding banks already have some headroom even over the current SLR.
Crisil principal economist D K Joshi said the RBI measures are aimed at easing liquidity, although there would not be much pressure on the banks.
"I feel liquidity is quite comfortable, nevertheless the facility would help the banks to tide over temporary problem," Punjab & Sind Bank chairman and managing director G S Vedi said.
However, Bank of Baroda (BoB) executive director R K Bakshi said banks face liquidity pressure on account of the huge 3G spectrum licence fees and advance tax payouts to the government by telecom and other companies.
"Liquidity has really become tight in the last few days. 3G auction taking double the amount than what was expected earlier will put pressure on liquidity...The RBI step will definitely help."
The second LAF window is importance since banks towards the close of the day would know exactly how much is their actual demand for cash after taking money from each other from the call money market.
Currently, the repo rate, which is the short-term lending rate of RBI, is 5.25% and LAF auction takes place at the repo rate.
The fiercely competitive auction of 3G spectrum, which ended last week, offers Rs67,719 crore to the exchequer, almost double of the Rs35,000-crore projected in the budget.
This together with payments for broadband wireless access (BWA) and expected advance tax for the first quarter of this fiscal may result in Rs1 lakh crore outgo from the system.
"The latest assessment of liquidity conditions suggests that there could be temporary liquidity pressures in the market largely due to changes in government balances on account of advance tax payments and 3G auctions," RBI said in statement.
SBI chairman O P Bhatt had also admitted that surplus liquidity is gradually disappearing from the system that has forced it to raise certain segments of short-term corporate loans by 0.25%-0.50%.
However, Mr Bhatt indicated that there would not be general interest rates hike immediately as liquidity is enough despite expected payment for 3G auction and upcoming advance tax.
The government has already formed an Empowered Group of Ministers (EGoM) headed by finance minister Pranab Mukherjee on fuel price deregulation. The EGoM is expected to meet on 7th June
The Planning Commission has pitched for linking of domestic fuel prices with those in the international market saying it is necessary for country's global "economic reputation," reports PTI.
"India's international economic reputation requires us to say that fuel prices are going to be linked to global prices.
I think that linkage (of fuel prices with global prices) is unavoidable," Planning Commission's deputy chairman Montek Singh Ahluwalia told PTI.
Asked about the affect of deregulation of fuel prices on poorest of the poor, he replied, "If you want to give (subsidised) kerosene to BPL households, give them."
"I personally think we should explore that possibility (of giving direct subsidy) as elsewhere in the world that is regarded as very positive thing to move to the direct (fuel) subsidy," he said, when asked about leakages and diversion of subsidy on fuel.
The government has already formed an Empowered Group of Ministers (EGoM) headed by finance minister Pranab Mukherjee on fuel prices deregulation. The EGoM is expected to meet on 7th June.
Besides freeing petrol and diesel prices from government control, dealing with the revenue lost on selling domestic LPG and PDS kerosene below cost is also on agenda of the EGoM.
For petrol and diesel prices to be freed from government control, rates would have to be raised by over Rs6 a litre.
Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum lose Rs255 crore a day by selling fuel below cost. They may end the fiscal with a Rs90,000-crore revenue loss.
They currently sell petrol at a loss of Rs6.07 a litre, while the loss is Rs6.38 per litre of diesel, Rs19.74 per litre of PDS kerosene and Rs254.37 per 14.2-kg LPG cylinder.