More Stories

Informist, Wednesday, Apr. 9, 2025

 

Please click here to read all liners published on this story

--RBI Malhotra: Policy stance should not be linked with liquidity conditions 
--RBI Malhotra: Stance change to not be associated with liquidity conditions 
--RBI Malhotra: Committed to provide sufficient liquidity 
--RBI Malhotra: Will proactively take measures to ensure adequate liquidity 
--RBI Malhotra: Will keep liquidity sufficiently in surplus 
--RBI Malhotra: Don't want to give a number on surplus liquidity 
--RBI Malhotra: Aim is to ensure proper transmission of repo rate
--RBI Malhotra: Looking at keeping surplus liquidity around 1% of NDTL 
--RBI Malhotra: Transmission of policy rate should not be disruptive
--RBI Malhotra: Daily VRRs because individual entities may need liquidity

 

MUMBAI - The Reserve Bank of India will ensure that liquidity is sufficiently in surplus to meet the needs of the economy and banking system, Governor Sanjay Malhotra said Wednesday. However, he de-linked the Monetary Policy Committee's stance from the central bank's liquidity actions.

 

"Our stance provides policy rate guidance, without any direct guidance on liquidity management," the governor said in his statement outlining the committee decisions. The rate-setting panel cut the repo rate by 25 basis points to 6.00% and changed its stance to 'accommodative' from 'neutral'.

 

After the liquidity fell to a deficit in mid-December, the central bank announced a slew of measures to inject liquidity and keep money market rates close to the RBI repo rate As a result of a cash reserve ratio cut in December, three dollar/rupee buy/sell swaps worth $25 billion and trillions of rupees of bond purchases through open market operations, banking system liquidity moved from injection mode to absorption mode on Mar. 29.

 

Malhotra said that the RBI will remain proactive in its liquidity measures. At the post-policy press conference, the governor said a comfortable surplus aims to warrant that the policy rate cut has a smooth transmission to the wider financial system. He declined to pinpoint a level of liquidity that the RBI was aiming for but said the central bank may have a broad range in mind that could change depending on circumstances. 

 

"Linking it (liquidity) to NDTL (banks' net demand and time liability) will come around 1% or so, now that we are in the easing cycle we will be looking at and we'll keep it sufficiently surplus," the governor said. According to the latest RBI data, banks' deposits were at INR 225.75 trillion on Mar. 21, while the central bank's net liquidity absorbed from the banking system –- a proxy for the liquidity surplus –- was at INR 1.33 trillion on Tuesday. 

 

By being proactive on liquidity, the RBI wants to ensure a quicker transmission of the repo rate cuts to overnight money market rates and eventually to longer-term rates, Malhotra said. However, the central bank will be watchful to ensure that the transmission is non-disruptive.

 

Commenting on the daily variable rate repo auctions, the governor said that the auctions are not representative of a system-wide tightness in liquidity but instead are a way of ensuring that individual entities do not face any crunch of funds. The RBI had announced on Jan. 15 that it will hold variable rate repo auctions every working day until further notice. The central bank has continued to hold the auctions even though the RBI has been absorbing liquidity from the banking system through its daily operations since the end of March.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Vidhushi RajPurohit

Edited by Saji George Titus

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.