Monday, February 25, 2013

RBI to infuse 10,000- crore liquidity via OMO route

Liquidity conditions are likely to remain tight and may not fall below, 1 lakh crore in the near term, despite the Reserve Bank of India (RBI)’ s announcement of open market operations ( OMOs) on Friday.
After market hours today, RBI announced an OMO up to ₹ 10,000 crore on Friday. OMOs are market operations conducted by RBI by way of sale/purchase of government securities to adjust rupee liquidity conditions.
The government securities RBI will purchase through OMO are 7.32 per cent 2014, 7.59 per cent 2016, 8.15 per cent 2022 and 8.20 per cent 2025. “ The liquidity deficit in the system is not expected to improve in a major way due to this. We need one more OMO next week and
probably another one, depending upon the situation,” said Prasanna Patankar, senior vice- president, STCI Primary Dealer.
Today, banks borrowed ₹ 1,28,400 crore from RBI’s daily liquidity adjustment facility (LAF), compared with an average borrowing of slightly above ₹ 1 lakh crore last month, far ahead of RBI’s comfort zone.
But, the announcement of the OMO is expected to be positive for government bonds.
“The bond market will get comfort and yields are expected to drop on Tuesday,” said S Srinivasaraghavan, executive vice- president and head ( treasury) at Dhanlaxmi Bank. The yield on the 10- year benchmark bond 8.15 per cent 2022 fell marginally on Monday at 7.7976 per cent.
It is expected to drop by another two to five basis points tomorrow. The Street believes to comfort liquidity conditions, government spending, having slowed down during the current financial year, should pick up.
“Government spending needs to flow into the system to bring down the liquidity deficit. OMO will just support the market. There is oil subsidy worth ₹ 25,000 crore that is expected. This fiscal, the
government has been trying to control its spending to keep the fiscal deficit under control,” said a treasury official of a private sector bank.
The government has been trying to control spending in a bid to stick to the fiscal deficit target of 5.3 per cent of GDP for FY13. Last Friday, the government had cancelled the last scheduled auction of
government bonds worth ₹ 12,000 crore.
As the final instalment of corporate advance tax is due on March 15, the Street expects the liquidity deficit to worsen.
“Around the first 10- 12 days of March, the system loses around 15,000- 20,000 crore on account of rise of currency with public. This is a seasonal phenomenon due to which liquidity deficit will again go up and subsequently, there will be advance tax outflows of ₹ 60,000- 70,000 crore,” said Suyash Choudhary, head ( fixed income), IDFC Mutual Fund.
LAF (cr) Source: RBI

As the final instalment of corporate advance tax is due on March 15, the Street expects the liquidity deficit to worsen EPFO to pay 8.5% interest on deposits for FY13

Decision taken at the meeting of the Central Board of Trustees PRESS TRUST OF INDIA New Delhi, 25 February Retirement fund body Employees Provident Fund Organisation ( EPFO) today decided to pay 8.5 per cent interest rate to its over 50 million

subscribers on their provident fund ( PF) deposits for the financial year 2012- 13, higher than the 8.25 per cent provided in the previous financial year.

The decision was taken at the meeting of the Central Board of Trustees (CBT), the highest decision making body of EPFO, chaired by the labour minister.

“A decision has been taken to pay 8.5 per cent interest on PF deposits. But we have expressed our reservations, as we wanted higher interest rate,” said D L Sachdev, secretary, All India Trade Union Congress, after the CBT meeting. Earlier, a note prepared by EPFO for consideration of the February 15 meeting of the Finance and Investment Committee ( FIC) had said, “... 8.5 per cent rate of interest for the year 2012- 13 is feasible.” According to the EPFO estimates, apayment of 8.6 per cent interest rate on PF deposits would result in a deficit of 240.49 crore whereas a8.5 per cent interest rate for the current financial year would leave a surplus of ₹ 4.13 crore.

In the FIC meeting, union leaders refused to discuss the issue regarding payment of interest in the current financial year, as the agenda note for the issue was not provided in advance to them, sources said, adding the note was tabled during the meeting.

They had said the EPFOs estimates would be directly tabled before the CBT meeting ,for final approval. The notification on interest rate is issued by the government after concurrence with the finance ministry. Usually, EPFO announces interest rate at the beginning of the year, but there has been a delay this time.

Trade unions have been pressing for an early meeting of the CBT to decide on the interest rate for the current financial year. EPFO had paid 8.25 per cent interest to its subscribers for 2011- 12, lower than the 9.5 per cent disbursed in 2010- 11. Interest rate for the financial year 2010- 11 was 9.5%.

Usually, EPFO announces interest rate at the beginning of the year, but there has been a delay this time State FMs’ panel agree on GST law: Odisha minister

No comments:

Post a Comment