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The Reserve Bank of India on Tuesday fired yet another salvo to drain liquidity from the banking system and stamp out speculation in the foreign exchange market.
The central bank said individual banks can tap its liquidity adjustment facility (LAF) only up to 0.5 per cent of their deposits. Given that aggregate deposits in the banking system stood at Rs 70,90,000 crore in the fortnight ended June 28, the system as a whole will be able to access from the RBI only Rs 35,450 crore a day. On July 16, the RBI had set a limit of Rs 75,000 crore on the amount banks could collectively borrow from it at 7.25 per cent interest. Before this, banks had unlimited access to funds from the RBI, provided they had excess government securities to pledge.
CRR balance
In another liquidity-draining measure, the RBI has asked banks to maintain a minimum daily cash reserve ratio (the slice of deposits they have to park with the RBI) balance of 99 per cent of the requirement against 70 per cent earlier. A dealer with a public sector bank said the new stipulation is as good as an indirect 25 basis points increase in CRR.
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