Chart of the Day: The signs of tightening
The liquidity of the banking system is at the center of attention again. Even though it is still a surplus, excess liquidity is now reduced quickly.
The indicator of this is the Standing Deposit Facility (SDF), which was introduced by the Reserve Bank of India in April.
The central bank makes the SDF level – with a price of 4.65 percent – the corridor floor of the last night and the marginal standing facility, which is 5.15 percent, is the sky.
The policy repo level, amounting to 4.90 percent, is a nominal anchor in which the RBI seeks to maintain the call rates last night.
In the midst of the many daily and two weeks of liquidity windows operated by the central bank, the number of SDFs shows excess idle funds owned by the bank.
Because this is the floor level, subscription to SDF is an actual indicator of a surplus liquidity, because the bank has run out of all the ways to use liquidity and choose the lowest possible return here.
SDF outstanding fell quickly and only slightly above RS 50,000 Crore on July 27.
At the same time, sporadic loans at the daily repo auction have also been observed. It is not surprising that the call rates for the summons have moved above the current repo level. This shows not only a decrease in liquidity surplus but also uneven reduction.
