STOCK MARKET BSE NSE

RBI to drain liquidity without destabilising markets, says deputy governor Viral Acharya

The central bank has been mopping up excess liquidity from the market using cash management bills and open market sale of bonds since demonetisation.

Published: 02nd August 2017 04:59 PM  |   Last Updated: 02nd August 2017 05:03 PM   |  A+A-

RBI deputy governor Viral Acharya | YouTube

RBI deputy governor Viral Acharya | YouTube

By Reuters

MUMBAI: The Reserve Bank of India will continue to drain surplus liquidity from the banking system gradually without destabilising the market, Deputy Governor Viral Acharya said after the central bank's monetary policy meeting on Wednesday.

The central bank has been mopping up excess liquidity from the market using cash management bills and open market sale of bonds since a shock ban of high value notes by Prime Minister Narendra Modi left banks flush with cash.

"We remain in touch with the government to make our tool kit for this task more complete," Acharya said. "In the meantime, we will continue with surplus liquidity management using instruments indicated in the April policy. Our intent is not to actually destabilise or shock the market in any way," he added.

The Reserve Bank of India cut its policy rate on Wednesday by 25 basis points to 6 per cent, the lowest since November 2010, as slumping inflation allowed the central bank to focus on boosting an economy growing at the slowest pace in over two years.

The Reserve Bank of India is comfortable with interest rates being slightly higher than its stated preference of having a difference between the repo rate and the inflation target of 1.75 percent, Deputy Governor Viral Acharya said.

The difference now stands at 2 percent, after the RBI cut the repo rate by 25 basis points to 6 per cent, above the central bank's inflation target of 4 percent. "I think we are just slightly outside of the range of 1.75 per cent and we are comfortable with that," Acharya said.



Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp