Anticipating liquidity tighteness in view of advance tax payments by India Inc, the Reserve Bank of India said it will inject Rs 10,000 crore into the banking system on Friday under the 14-day term repo auction.
“As the liquidity conditions are expected to tighten on account of advance tax payments commencing from mid-December 2013, Reserve Bank has decided to provide additional liquidity of Rs 10,000 crore through the 14-day term repo scheduled to be conducted on December 13,” the RBI said in a statement.
Under the repo transaction, banks borrow from the central bank at 7.75 per cent per annum interest against the pledge of Government securities.
The RBI has been closely monitoring liquidity conditions to ensure that adequate liquidity is available to support the flow of credit to the productive sectors.
Currently, bank borrowing under the liquidity adjustment facility (LAF) window has come down substantially as they are flush with liquidity.
Banks’ borrowing under LAF on Wednesday was to the tune of Rs 19,900 crore.
The borrowing has largely remained under Rs 20,000 crore for about two weeks.
beena.parmar@thehindu.co.in