Custom Search

Friday, March 20, 2015

RBI to make public Centre’s surplus cash balance to help banks manage liquidity

To help market participants, such as banks, assess systemic liquidity better, the Reserve Bank of India will indicate the Government of India’s surplus cash balance, which will be reckoned for auction, with effect from April 6.

Officials positive

The government’s surplus cash balance with the RBI will be indicated by way of a footnote in the press release issued daily on “Money Market Operations,” the central bank said in a statement.

According to NS Venkatesh, Executive Director (Treasury) & CFO, IDBI Bank, once the information on the government’s cash balances is put in the public domain daily, liquidity management by banks will improve further.

Liquidity provision

In its role as banker to the government, the RBI’s cash management operations involve provision of liquidity to tide over temporary deficit of the government as also facilitate investment of the temporarily surplus cash balances of the government.

Government cash flows largely follow a seasonal pattern.

Typically, the government has negative net cash flows during the first quarter of a year; cash balances improve during the second quarter and remain positive during the third and fourth quarters, according to an RBI paper.

“This unevenness in cash flows mainly reflects the back-loaded revenue receipts. The government receives quarterly direct tax receipts which are usually concentrated on the last payment date (15th of June/September/December/March); higher proportion of tax is payable during the second half.

“As a result, government cash balances spike during these dates,” it said.

One-off revenues

The government also receives one-off non-tax revenues from auction of resources, such as telecom spectrum and coal.

Whenever the government’s cash balances with RBI increase/ decrease, there is a decrease/ increase in Reserve Bank’s credit to the Centre.

Source : Thehindubusinessline


Post a Comment

Popular Posts

Desi Google | A2Z Famous Quotes | What's Cooking America | Joke Site