Feb 03, 2016, 09.14 PM | Source: PTI
After the announcement of the bi-monthly monetary policy yesterday, Governor Raghuram Rajan had refuted notions of liquidity being under pressure.
It said as of now, the liquidity deficit is averaging around Rs 1.5 trillion compared to around Rs 500 billion over October-November period but conceded that there might be some seasonal factors causing it. It also acknowledged that the RBI is engaged in doing term repos for mitigating the liquidity tightness.
In what seems to address the RBI's key concern on excess liquidity fuelling inflation, the note said, "In a situation of capacity under-utilisation as we are currently witnessing, any possible liquidity injection may not be counterproductive as far as fueling inflation is concerned." After the announcement of the bi-monthly monetary policy yesterday, Governor Raghuram Rajan had refuted notions of liquidity being under pressure.
Rajan told reporters that the view that there is enormous liquidity shortage in the banking system is not consistent with facts. "Our measure of whether there is enough liquidity is to see whether rates in the call money market are broadly in line with the policy rates and I think the evidence is that they are," he told reporters during the post policy conference. "We will look at the emerging liquidity needs and use all instruments to manage those," he added.
Rajan also said the RBI is reviewing its entire liquidity framework over the next few months. On liquidity management, Rajan said RBI will use all instruments, including open market operations (OMO), to ensure there is enough liquidity in the market. "We have variety of instruments to manage short term liquidity as well as long term liquidity and OMOs is one of them," he said.
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