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Chandigarh, Jul 6 (PTI) The Finance Ministry today said the tight cash conditions in the banking system, triggered by huge payments towards spectrum by telcos and advance tax, is likely to ease in the next 10-15 days. "Tight liquidity condition is likely to ease in the next 10-15 days," Financial Services Secretary R Gopalan told newsmen here after a meeting of Finance Minister Pranab Mukherjee and Northern chief ministers and PSU bank heads. The system is facing cash shortage after over Rs 1 lakh crore went out of the system due to payment for spectrum fees for high speed telecom and broadband services, besides advance tax payment. As such, many experts expect that RBI may go in for another round of hike in short term key rates, but is not likely to raise cash reserve ratio (CRR) in its July 27 monetary policy review. CRR is the proportion of deposits that banks keep with RBI and a hike in this ratio sucks liquidity from the system. Late last Friday, in a surprise move, the RBI had raised short-term lending and borrowing rates (repo and reverse repo) by 25 basis points to curb inflation, currently in double digits. However, it refrained from raising CRR. It did not raise even short-term rates earlier due to pressure on liquidity. While effecting the 25 bps hikes last week, RBI had said, "it was considered inadvisable to raise the policy rates as the financial system was dealing with liquidity pressures. The liquidity situation has since begun to ease." Gopalan said the bank credit will expand by 21-22 percent this fiscal. "You see monsoon is good. I expect at least 21-22 percent credit growth for the banking industry," he added. PTI BSP CHS JD IND.
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