Government not spending enough to ease liquidity: RBI
09 Dec 2010
The Reserve Bank of India (RBI) has blamed the current tight liquidity position in the banking system on the cash pile with the central government, which it has so far failed to channelise to productive uses.
The government is sitting on a huge cash pile, which is lying idle, aggravating the strain on the banking system, RBI governor D Subbarao said on the sidelines of the board meeting today. He said the government had cash balances of Rs92,000 crore as of Wednesday.
"We expect the government to spend and reduce the cash balance and ease the liquidity position," he said. "Although the government is spending, it is not enough," he added.
He said government's cash balances, which were much lower in the first half of current fiscal year than that of the previous year have increased in the wake of higher indirect tax collection and the huge receipts from the spectrum auction.
"We are deeply conscious of the liquidity situation," Subbarao said.
The liquidity situation is so tight that banks today sought to borrow over Rs83,500 crore from RBI through its repo window.
