RBI announces liquidity easing measures; cuts MSF rate by 50bp to 9.0% - Angel Broking

RBI has continued its calibrated unwinding of the exceptional liquidity tightening measures (which began on September 20, 2013 when RBI reduced MSF rate by 75bp to 9.5%) and has reduced the MSF rate by 50bp from 9.5% to 9.0%. Also RBI has announced additional liquidity through term repo for 7 day and 14 day tenor of an amount upto 0.25% of NDTL beginning October 11, 2013. RBI had earlier hinted that in the coming months, the MSF spread over the repo is likely to further decline to 100bp.

As an immediate impact of these measures, short-term interest rates are likely to reduce proportionately. The measures are positive for more wholesale funded banks, as it is likely to result in further decline in their costs of funds by roughly 5-10bp on an annualized basis (the reduction in cost across banks would be in congruence with its dependence on wholesale funds).

Source : Equity Bulls

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