August 5, 2013 / 9:59 AM / 4 years ago

MARKET EYE-India cbank may look at more steps to drain cash-StanChart

* India's central bank may take further measures if liquidity
conditions improve, running counter to its goal of draining
cash.
* Lenders' borrowing from the marginal standing facility window
- an emergency funding window - has come down, pushing down
overnight cash rates to 8.00/8.15 percent, much below
the central bank's emergency funding rate of 10.25 percent.
* Traders say signs of accelerating government spending are
improving liquidity.
* That would run counter to the RBI's cash-draining measures
which sought to reduce the amount banks can borrow from the
central bank in order to spur them to raise funds at the higher
MSF rates.
* Standard Chartered analysts say the RBI could look at further
lowering the cap on banks' borrowing, selling more shorter-tenor
securities to drain cash, fine-tuning the export credit
refinance scheme or temporarily increasing the cash reserve
ratio, or the amount of cash lenders must keep with the central
bank.
* Standard Chartered expects the announced steps to stay in
place for at least two months.

 (swati.bhat@thomsonreuters.com/;
swati.bhat.thomsonreuters.com@reuters.net)

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