Liquidity position comfortable, RBI says ahead of policy review

With liquidity situation within its comfort zone, the central bank said its monetary action next week depend upon developments in money market

New Delhi: Reserve Bank of India on Monday said the liquidity situation currently is comfortable and indicated that monetary policy action in the forthcoming mid-quarterly review next week would depend on latest developments in the money market, reports PTI.


"For the last several weeks..., liquidity levels have been within our comfort zone... (but) we monitor this on a daily basis", Subir Gokarn, deputy governor, RBI told reporters on the sidelines of a function.


RBI, he added, would take note of emergence of "signs of stress, particularly if they are likely to be persistent. We will take that into account...we have for quite some time realised there was stress in the market both in terms of quantity of liquidity adjustment facility (LAF) borrowings and in terms of the behaviour of the call rate which is the number we look at. There are no signs of stress at the moment".


The central bank, in its mid-quarterly review of monetary policy to be announced on 17th September, is expected to take steps to promote growth and also contain inflationary expectations. The RBI is also expected to respond to some bankers' demand for abolition of cash reserve ratio (CRR), the amount of money which banks are required to keep with the central bank in cash.


Answering questions on inflation and its impact on the forthcoming policy review, Gokarn said: "I don't have expectations. I don't cite expectations. We will look at the data when it comes".


The government is likely to come up with the August inflation data on 14th September. The wholesale price based-inflation in July slipped to 6.87% from 7.25% in the previous month.


The Reserve Bank has been taking open market operations (OMO) to pump in liquidity into the market by buying government bonds. The OMO, which is easy to implement, only has short term implications on the liquidity situation.


The CRR cut is more significant as it has lasting impact on the liquidity situation, sources said, adding the central bank would have to take into account various other factors, including the need for liquidity, before announcing any changes.


As of now, sources said, the central bank was keeping the options open and would act depending upon the need of the hour.


On currency fluctuation, Gokarn said: "Over the last several weeks, the currency has been relatively stable (as) there is a rough balance between inflows and outflows. We are obviously monitoring the situation and will react to it as appropriate."


The central bank had intervened in the foreign currency markets and taken administrative steps to check volatility in rupee-dollar exchange rate.


As regards India's foreign currency reserves, Gokarn said, "it's something that we have to measure against the potential short-term liability. That's something we have been benchmarking consistently and we have never been uncomfortable with the level of reserves which we had".


Intervention in forex market, Gokarn said, "has been one component of our approach to the exchange rate. Others have been in terms of some administrative actions which we took in November, December and later and in fact have rolled back some of those because we felt they were adding some stress or difficulty to the market and to the liquidity".


The third component, he added, "was to expand the channel available to foreign investors".


On the impact of the European Central Bank's (ECB) decision to buy unlimited sovereign bonds to save Euro, Gokarn said it would bring "some comfort to the investors across the board. We saw some of that in the immediate aftermath of the announcement and I suspect that is the way it will play out".


Besides ensuring liquidity in the markets, he said, the ECB decision would provide assurance that the European bond markets would remain very stable.


In order to deal with the financial problems of the eurozone countries, the ECB last week had announced a programme that would allow it to execute potentially unlimited sovereign bond-buying.


BoB cuts home loan rates by 0.25% for old and new customers

Bank of Baroda said to offer a stimulus to sagging demand amid the ongoing slowdown, it cut its interest rates on home loans by 25 bps for existing and new borrowers

Mumbai: State-run lender Bank of Baroda (BoB) on Monday announced a 0.25% reduction in home loan rates across all categories and for both new as well as existing customers, in line with its state-run peers, reports PTI.
The new rates will be effective today, the third largest public sector lender said in a statement.
"To offer a stimulus to sagging demand amid the ongoing slowdown, we have reduced the interest rates on home loans by 25 bps across the board for our existing and new borrowers," it said.
The country's largest lender, State Bank of India (SBI), had last month taken everybody by surprise and announced a similar cut in its retail offerings, including home and auto loans.
SBI has said since then it has seen an uptick in demand. Others such as IDBI Bank, Oriental Bank of Commerce, Corporation Bank, Dena Bank and Indian Bank, too, have cut interest rates following the SBI move.
In a departure from others, BoB has stated that benefits of the rate cut are also applicable to existing borrowers.
In another development, BoB announced a reduction in spreads on its trader loans facility by 1 percentage point, after which loans will be available at 13.5%. The new rate will be effective today.


Appeal to Mumbaikars for an environment friendly Ganesh festival

Lets celebrate Ganesh festival in an eco-friendly way; there is help at hand in Mumbai: United Way Mumbai Helpline ( Telephone 022-24937676

Celebrating the Ganesh festival in an eco-friendly way can help avoid adverse effects on the environment. Mumbaikars must opt for an eco-friendly Ganesh Festival for preserving the city’s water bodies and the environment, says United Way Mumbai Helpline.
The key recommendations of the Helpline include: (a) Opt for Ganesh idols made of
‘Shaadu’, natural clay or paper pulp; (b) Use bio-degradable decorations such as paper mache, paper, wood, etc.; (c) Ensure the idols are painted with natural colours e.g.turmeric, ‘multani mitti’, etc; (d) Collect offerings of flowers and other organic material in a compost pit; (e) Immerse idols in artificial tanks created by MCGM and housing societies.
The activities of United Way Mumbai Helpline in this regard are focussed on conducting awareness drives at Ganesh Mandals, residential societies and immersion sites; and providing Ganesh Mandals the facilities for maintaining cleanliness and segregating nirmalya (holy waste).
United Way Mumbai Helpline has issued a general appeal to the public, “Be an aware and responsible citizen. Contribute in making this Ganesh festival environment friendly!” United Way Mumbai Helpline recommends a list of outlets, where the clay idols and decorative materials can be bought so that we remain eco-friendly in Mumbai during and after the Ganesh festival this month.
Ganesh festival is one of the biggest festivals in Mumbai city which generates a large amount of holy waste (nirmalya) in the form of flowers, decoration material and other religious offerings. Mumbai will soon witness a frenzy of celebrations. In all, it is expected that nearly three lakh Ganesh idols will be brought to homes and community celebrations—and a similar number of idols will eventually be immersed at the various beaches and lakes. The city’s beaches, never really known to be totally clean, get further polluted with holy waste—pieces of idols which have not got dissolved, flowers, decoration material, etc.
If you want to celebrate Ganesh festival in an eco-friendly way, there is help at hand in Mumbai: United Way Mumbai Helpline ( Telephone 022-24937676)



Dipak Chatterjee

4 years ago



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