Banks have made a strong representation to Reserve Bank of India to
release more cash into their system. Presently the banks are facing
a liquidity crunch. Bankers have also urged the RBI to allow them to
offer higher interest rate on the NRI deposits. As of now, banks can
not offer more than 50 basis points over Libor in NRE deposits and Libor
minus 25 bps on FCNR (B).
The demand for cash is visible in the huge borrowings by banks from
RBI - banks collectively borrowed a record Rs 90,075 crore from the
central bank on Monday, over both its liquidity adjustment facility
windows. Borrowings from the RBI have been in the range of Rs 50,000
crore - Rs 80,000 crore over the past couple of weeks. Further, bankers
present at the meeting indicated that they expect the demand to rise
in the coming quarters. A request was also made for refinancing of oil
bonds to provide funds to state owned refiners who are one of the large
borrowers. Bankers made this pitch in their first formal meeting with
the new governor of the Reserve Bank of India (RBI), D Subbarao.
