Banks' Liquidity Squeeze Worsens as Borrowing from RBI Hits Over 4-Year High of ₹1.97 Trillion

Liquidity deficit in banking system widened to ₹1.46 trillion on Monday, highest in over 4 years
Banks' borrowing from RBI through marginal standing facility window stood at ₹1.97 trillion
Outflows due to advance tax, GST payments coincided, with money blocked for incremental CRR
Bankers expect deficit to ease next month as government spending resumes
RBI expected to keep liquidity tight to maintain pressure on rupee and inflation

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8/20/2023

IDBI divestment to be pushed to next fiscal; divestment target unlikely to be met

### Summary The Indian government is unlikely to divest its stake in IDBI Bank this fiscal year, causing a delay in meeting its divestment target of ₹51,000 crore. However, the government expects higher non-tax revenues to offset any revenue shortfall and maintain the fiscal deficit target of 5.9% of GDP. ### Facts - 🏛️ The Indian government is unlikely to divest its 60.72% stake in IDBI Bank this fiscal year, and it is expected to be pushed to the next fiscal year. - 📉 The delay in proposed divestments means that the government is unlikely to meet its divestment target of ₹51,000 crore for the ongoing fiscal year. - 💰 The government expects higher non-tax revenues, including higher dividends from the Reserve Bank of India (RBI) and public sector banks, to offset any revenue shortfall and maintain the fiscal deficit target of 5.9% of GDP. - 💸 The RBI had transferred ₹87,416 crore as dividends to the government for FY23, and the government received an equity dividend of about ₹13,800 crore from listed public-sector banks. - 🎯 The government's divestment target of ₹51,000 crore for FY24 is lower than the previous financial year's target of ₹65,000 crore. - 📅 The government had aimed to issue financial bids for IDBI Bank by December 2023 and close the transaction in the fourth quarter of the current fiscal year. - 🛢️ During FY23, the government shelved the strategic disinvestment of Bharat Petroleum Corp. Ltd due to a cooling down of oil prices, and the disinvestment of Central Electronics Ltd was scrapped after the selected bidder failed to disclose ongoing litigation. - 📝 The government's goal of strategically divesting its stake in various public sector companies is an ongoing process that requires consideration of regulatory and due diligence processes.

9/13/2023

Bank Deposits See Biggest Outflow Since Failure of Silicon Valley Bank as Fed Ramps Up Support for Distressed Banks

US banks are experiencing significant deposit outflows, with total bank deposits plunging by over $70 billion in a week, the lowest levels since May, leading to concerns about the ongoing regional banking crisis; meanwhile, US commercial banks have also suffered significant losses in deposits, with 60% of deposits moving to higher-yielding money market funds, and the balance of unrealized losses on securities at commercial banks rising to $558 billion in Q2; to address these issues, the Federal Reserve has reached an all-time high of $107.8 billion in its banking loan facility to provide funding to distressed banks.

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Posted 9/20/2023, 3:38:33 PM