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RBI seen holding rates low, clues awaited on normalising liquidity

To help the economy through the hard times caused by the pandemic, the RBI has maintained excess rupee liquidity in the banking system with the daily surplus currently exceeding 6 trillion rupees ($80.78 billion).

August 03, 2021 / 12:10 PM IST

Nursing an economy recovering after deadly second coronavirus wave, India’s central bank is expected to leave interest rates at record lows for a seventh straight meeting on Friday, and the markets will focus on what it says about normalising liquidity.

To help the economy through the hard times caused by the pandemic, the RBI has maintained excess rupee liquidity in the banking system with the daily surplus currently exceeding 6 trillion rupees ($80.78 billion).

While most analysts reckon the RBI won’t raise interest rates till next year, some expect the RBI to offer some clues as to when it will start reducing liquidity in a commentary that is released after the monetary policy committee (MPC) meeting.

All 61 economists polled by Reuters said they see no change in the repo rate which has been steady at 4% since May last year.