On the eve of the redemption of India Millennium Deposits of $7.3 billion t the non-resident Indians, Finance Minister P Chidambaram on Wednesday indicated that there would be no problem in the liquidity situation.
"We have enough liquidity. So there is no problem (when IMDs are redeemed)," he told reporters after flagging off a roadshow for large taxpayers units in New Delhi.
State Bank of India will start repaying NRI depositors about $7.3 billion from Thursday, when its IMD matures.
Several banks including SBI, ICICI Bank, IDBI Bank, Bank of Baroda, Union Bank of India and Centurion Bank of Punjab along with insurance major Life Insurance Corporation are planning to tap a significant chunk of the IMD redemption.
IMD redemption along with high credit demand have put pressure on the liquidity situation as it is reflected in the sudden spurt in over-night call money rate to 7 per cent, well above Reserve Bank's reverse repo rate of 5.25 per cent.
Chidambaram, however, dispelled fears that there will be pressure on other short-term rates as well.
With the country's foreign exchange reserves at about $145 billion, government and RBI do not see any reason for concern while repaying the money to the NRIs who had invested in IMD five years ago.
On borrowing, Chidambaram said the government will go ahead with its market borrowing schedule for January when the Centre is slated to mop up Rs 10,000 crore (Rs 100 billion) between January 3 and 11. Government is slated to borrow Rs 58,000 crore (Rs 580 billion) from the market in the second half of Rs 2005-06.
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