The Reserve Bank of India’s liquidity tightening measures are short-term in nature and won’t require banks to change their deposit and lending rates, say top bankers.
The central bank on Monday restricted banks’ access to easy money in a bid to stabilise the rupee and prevent speculation in the currency market.
The RBI placed a cap of Rs 75,000 crore on daily borrowings by banks from it. The RBI further increased the interest rate under marginal standing facility (MSF) to 10.25 per cent from 8.25 per cent.
“The RBI measures are just temporary in order to curb currency volatility. They (measures) won’t stay for long. We are not considering any change in our base rate,” said V. R. Iyer, Chairperson and Managing Director, Bank of India, on the sidelines of bankers’ meet with the RBI on frauds in the system.
BoI had revised its base rate to 10 per cent from 10.25 per cent earlier this month.
The RBI also said it will sell bonds worth Rs 12,000 crore in the secondary market on July 18 to suck out liquidity from the banking system. However, till recently, the RBI had been buying bonds to ease the liquidity situation. The rupee fell to its lifetime low of 61.19/$ on July 8.
According to S. S. Mundra, Chairman and Managing Director, Bank of Baroda, it is too early to jump to conclusions as the RBI measures are to bring stability in the rupee… “If you look at the position of banks, there is hardly any money being borrowed through MSF,” he said.
Looking at the pattern, the money was probably going more into the trading positions. So, it may take some time before the trading position can be liquidated…Maybe till the trading positions are wound up, it may create some problem, Mundra added.
Ruling out a rate hike by banks, the BoB chief also said the liquidity situation is better than yesterday. “I am not talking about one-day’s position or the 14-day cycle where products need to be covered as that will be differentiated… but on an average the liquidity situation is better,” he said.