To curb inflation, RBI plans bond sales to suck liquidity
₹3.43 trillion worth of excess liquidity that came into the system post-withdrawal of ₹2,000 notes. Das, however, expects liquidity to ease with the pick-up in government spending.
“I have reiterated several times in my previous policy statements that excessive liquidity can pose risks to both price and financial stability," he said. While some banks have been parking large sums with RBI, there are others coming to the central bank seeking funds to tide over their short-term liquidity requirements, he said.
“It is desirable that banks having surplus funds explore lending opportunities in the interbank call market" and not with the RBI, he said. According to Nomura Global markets research, “The combination of hawkish forward guidance and the threat of an OMO to manage liquidity—sent a hawkish signal overall.
It has retained the option to act on both rates and liquidity, but there is uncertainty over what will trigger their usage. This creates elevated uncertainty for market participants but gives the RBI greater flexibility to act (or not act).
Equity and currency markets remained stable, posting marginal gains. The rupee ended steady at 83.24 while Sensex and Nifty gained a little over 0.5% each."Exciting news! Mint is now on WhatsApp Channels
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