Bank liquidity deficit widens amid advance tax outflows

Posted By: Religare
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Banks borrowing under the Reserve Bank of India's (RBI) daily liquidity adjustment facility (LAF) jumped to Rs 1,42,670 crore on Monday compared with an average Rs 1 lakh crore daily in the last month, as advance tax outflows were on their way out of the system.

The last day for payment of advance tax was Friday when banks had borrowed Rs 1,35,175 crore from RBI's LAF window. Experts said that liquidity may remain tight this week as well as tax outflow is estimated to have sucked around Rs 60,000 crore from the system.

In line with the liquidit crunch, FM P Chidambaram on Monday said "I am sure he (RBI Governor D Subbarao) will address the issue of liquidity and in the policy, there will be a paragraph on liquidity."

Chidambaram's statement came a day ahead of RBI's monetary policy review, raising hopes that central bank will cut rates this time again to lift growth.

Read more about: banks, liquidity
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