Effects of Key Financial Markets’ Infrastructure on Cash and Liquidity Management of Banks in India

Authors

  •   Sasanka Sekhar Maiti Director, Reserve Bank of India, Department of Statistics and Information Management, C-8 7th Floor, Bandra Kurla Complex, Bandra East, Mumbai - 400 051
  •   N. Hemachandra Professor - Industrial Engineering and Operations Research, Indian Institute of Technology Bombay, Powai, Mumbai - 400 076

DOI:

https://doi.org/10.17010/aijer/2018/v7i4/131662

Keywords:

Payment Systems

, Real Time Gross Settlement, Cash With Banks, Bankers Deposit, Intra-day Liquidity

E42

, E58, J33

Paper Submission Date

, December 19, 2017, Paper sent back for Revision, April 24, 2018, Paper Acceptance Date, August 20, 2018.

Abstract

The article examined the effect of introduction of the Real Time Gross Settlement System (RTGS) on banks' cash requirements (viz. cash with banks) and liquidity requirements of banks (banker deposits) with the RBI. The empirical results indicated that the introduction of the RTGS system reduced cash requirements of banks significantly due to adoption of centralized processing systems, which facilitated better cash management for banks. However, at the same time, liquidity requirements of banks with the RBI increased on introduction of the RTGS, which did not grow with time, though more amount was settled in the RTGS. Demonetization resulted in huge cash requirements for banks, but it did not impact liquidity requirements of banks with the RBI.

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Published

2018-08-01

How to Cite

Maiti, S. S., & Hemachandra, N. (2018). Effects of Key Financial Markets’ Infrastructure on Cash and Liquidity Management of Banks in India. Arthshastra Indian Journal of Economics & Research, 7(4), 47–55. https://doi.org/10.17010/aijer/2018/v7i4/131662

Issue

Volume 7, Issue 4, July-August 2018

Section

Economic Development, Technological Change and Growth
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