Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: articles on VAT and GST in India :: VAT RATES :: due date for vat payment :: cpt :: list of goods taxed at 4% :: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARD :: empanelment :: TDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS
 
 
Direct Tax »
 Hopeful of meeting direct tax collection target for this financial year: CBDT
 Bengaluru tops in income tax probes after demonetisation
 Income Tax department rejects black money disclosures of over Rs 2 lakh crore
 CBDT urges people to protect bank accounts from 'unscrupulous elements'
 No change in gold seizure norms in proposed I-T Law amendments
 Direct tax collection will get a long-term boost, Franklin Templeton says
 I-T Act amendments upset calculations of cash hoarders
 Claim tax benefit on costs incurred to evict tenants
 The Integrated Goods And Services Tax Act, 2016
 Here’s what Income Tax Department did leading up to demonetisation
 I-T department asks IDS declarants to pay tax by November 30

Corporate advance tax outflow may worsen liquidity scenario
November, 30th 2012

Liquidity could worsen despite the Reserve Bank of India (RBI) announcing open market operations (OMOs) by purchase of gilts worth Rs 12,000 crore on December 4. Liquidity will be under pressure as the deadline for the third instalment of corporate advance tax falls on December 15. According to market estimates, the liquidity strain due to advance tax payment will be in the range of Rs 50,000-60,000 crore.

The street was expecting OMOs for quite some time and, in response, the RBI on Thursday announced for four gilts 8.24 per cent 2018, 8.19 per cent 2020, 8.15 per cent 2022 and 8.28 per cent 2027.

On Thursday, banks borrowed Rs 1,018.80 crore under RBIs daily liquidity adjustment facility (LAF), compared with a borrowing worth Rs 1,064.55 crore on Tuesday. Wednesday was a bank holiday due to Guru Nanak Jayanti. The borrowing by banks under the RBIs daily LAF stood at an average of Rs 92,820 crore in the past month.
Liquidity is expected to stay tight till the end of December. The peak-level LAF drawdown may overshoot Rs 1,50,000 crore, post advance tax outflows in the third week of December, said Moses Harding, head of economic and market research at IndusInd Bank.

Anoop Verma, associate vice-president at Development Credit Bank, agreed that LAF borrowings are set to rise from current levels. The borrowing under daily LAF may climb up by another Rs 20,000-30,000 crore as we approach December 15, said Verma. According to him, this will be because government spending is not improving.

But the street feels there is a need for more OMOs in a situation where liquidity is about to get strained and the RBI is auctioning gilts every week to meet government borrowing. In the current financial year, the RBI has already infused Rs 54,573.277 crore worth of liquidity by way of OMOs.

But, the OMO announcement is expected to help gilts yields fall from the current levels. The yield on the 10-year benchmark gilt 8.15 per cent 2022 may drop to 8.15 per cent on Friday, said S Srinivasaraghavan, executive vice-president and head of treasury, Dhanlaxmi Bank. On Thursday, the 10-year benchmark gilt yield ended at 8.21 per cent, compared with Tuesdays close of 8.19 per cent.

The yield on the 10-year benchmark gilt 8.15 per cent 2022 rose to a 12-week high of 8.23 per cent last week on speculations that the government would resort to additional borrowing to the tune of Rs 30,000-40,000 crore.

To ease the liquidity situation, the RBI had cut the cash reserve ratio (CRR) in the second-quarter monetary policy review on October 30, by 25 basis points to 4.25 per cent. CRR is the proportion of total deposits a bank has to keep with RBI as cash.

However, despite the CRR cut, borrowing by banks has been above the RBIs comfort level of +/- 1 per cent of NDTL (net demand and time liabilities). If the average daily borrowing under the RBIs LAF is below Rs 65,000 crore, then it is considered comfortable.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Organic SEO Outsourcing Organic Search Engine Optimization Outsourcing Organic Website SEO Organic SEO India Website SEO India Organic Search Engine Optimization India Organic Internet SEO India Organic Web

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions