Liquidity pressure may ease in Nov

Bankers are betting on Rs 1,00,000-crore inflows into the banking system easing liquidity pressures by November.

According to bankers, about Rs 20,000 crore will be released in the next couple of days on account of the cash reserve ratio cut. Another Rs 25,000 crore will be the inflow due to farm loan waiver.

The government has promised to pay banks 63% of the farm loan waiver in cash in the first week of November. This means that out of Rs 54,000 crore of the waiver, Rs 25,000 crore will be credited to banks. A further Rs 20,000 crore will come back to banks as repayment of fertiliser loans. In the last week of August, banks had given loans of Rs 22,000 crore to fertiliser companies for three months which would be due in the last week of November.

The other factors, which will improve the liquidity position, are government spending and spending by government employees. Arrears to central government employees will be released before Diwali. This is estimated to Rs 20,000 crore, or 40% of the arrears which would be released in the first week of November. These factors alone would contribute about
Rs 87,000 crore.

Over and above, government spending is expected to take off in a big way in the last two quarters of this fiscal year.

Source: EconomicTimes