Reserve Bank of India (RBI) Governor D Subbarao assured that the central bank would explore all the options available with it to ease liquidity strain in the banking system, including adjusting banksÂ’ cash reserve ratio (CRR) or any other mechanism.
He informed, during a post-policy conference call with analysts, that the central bank will not just limit itself to bond purchases by conducting open market operations (OMO) to address liquidity deficit.
In order to adjust the liquidity tightness in the system, the central bank announced OMOs worth Rs 10,000 crore. He, meanwhile, rubbished the assumption that OMO will be the preferred tool.
He also opined that the liquidity situation would get less uncomfortable in a few months from now. In an indication of tight liquidity condition, banks are borrowing
about Rs 97,600 crore on a daily basis from RBI’s liquidity adjustment facility (LAF).
The RBI, in its annual monetary policy review, on Friday reduced repo rate by 25 basis points to 7.25 per cent, while keeping the CRR unchanged at four per cent, its historical low.