Wednesday, 23 November 2016

RBI under pressure as banks deposit record Rs 4.32 lakh cr

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Excess of liquidity is putting a strain on Reserve Bank of India (RBI) as banks deposited Rs 4.32 lakh crore on Monday. This sudden gush of cash is straining the central bank as it is running out of securities to offer banks against these deposits, reports Business Standard. Earlier banks used to deposit Rs 5,000 crore of their excess cash in RBI's reverse repo window which reached a record high of Rs 4 lakh crore on Monday, which is expected to increase in the coming days. 

 

To tackle this incoming liquidity, RBI needs policy measures to protect the financial stability of its balance sheet. The central bank issues government securities equal to the deposits made by the banks and now it must have offered at least Rs 4.32 lakh crore of bonds to banks on Monday. Business Standard reports that as of June 2016, RBI's total holding was only Rs 7 lakh crore, which shows that the bank is left with a thin margin of bonds on its books.

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