This can be as good for borrowers as the withdrawal of liquidity will put pressure on bond yields, which could eventually be passed on to loans as well.
Governor announcing Liquidity Normalization Roadmap shaktikanta maid It said that the surplus liquidity currently stands at an average of Rs 9.5 lakh crore so far in October and the potential liquidity is over Rs 13 lakh crore. RBI plans to infuse surplus liquidity so that its borrowings from banks are under reverse repo Operations will come down to Rs 2-3 lakh crore by December 2021. At present it is around Rs 8.8 lakh crore. “We do not want suddenness. We do not want surprises. We do not want to rock the boat, and therefore, because we have to reach the shore, which is now visible and a journey beyond the shore,” Das said in his policy- He said in the post address, explaining the rationale behind not reducing the liquidity.
He said the RBI would work towards its 4% inflation target in a calibrated manner and without creating any disruption.
Das once again expressed concern over the inflationary impact of higher indirect taxes on fuel and said the issue was for the government to decide. “Gradual and calibrated unwinding of liquidity measures will support growth while keeping inflation under check,” it said. CH SS Mallikarjuna Rao, MD & CEO, PNB.
The Monetary Policy Committee voted 5:1 in favor of maintaining the status quo on the repo rate at 4%. RBI also decided to keep the reverse repo rate at 3.35%. Economists observed that governors are circumspect about growth with their policy statements, although all development goals were kept intact. “We are seeing signs of growth getting stronger and showing signs of stability. We are closely monitoring the evolving dynamics,” Das said.
For the current fiscal, the RBI on Friday retained its estimate for real GDP growth at 9.5%. The RBI, however, lowered its FY12 retail inflation forecast to 5.3% from 5.7%, saying the inflation trajectory has turned out to be more favorable than expected. He reassured the markets that liquidity would be available for growth and absorption would be through reverse repo where participation is voluntary. However, he indicated that there is no further need for a government securities acquisition program (G-SAP) through which RBI bought back the bonds.
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