Print   Close

Liquidity stance continues to remain accommodative: RBI

BusinessToday.In     February 5, 2021

The Reserve Bank of India will continue to maintain an accommodative liquidity stance to support growth in the economy battered by the COVID-19 pandemic.

RBI Governor Shaktikanta Das, in his address after the meeting of the Monetary Policy Committee, said the central bank's market operations amidst the pandemic dispelled illiquidity fears and bolstered financial market sentiment.

"The stance of liquidity management continues to be accommodative and completely in consonance with the stance of monetary policy. The RBI stands committed to ensure the availability of ample liquidity in the system and thereby foster congenial financial conditions for the recovery to gain traction," Das said.

Also read: RBI keeps repo rate unchanged, maintains accommodative stance

On government's market borrowing, Das said, the central bank will ensure "orderly" completion of Rs 12 lakh crore borrowing programme in a non-disruptive manner.

There has been a rise in international crude oil prices since November 2020 due to optimism on COVID-19 vaccination and additional policy stimulus. These factors resulted in return of risk appetite, which led to a surge in capital flows into emerging market economies like India and consequent increase in volatility in the financial markets, he said.

"The RBI has, however, proactively taken steps to insulate domestic financial markets from global spillovers and consequent volatility while ensuring comfortable domestic liquidity conditions," he said, adding that the central bank's two-phase restoration of cash reserve ratio (CRR) for banks to 4 per cent should be seen in this context.

However, he assured that systemic liquidity would continue to remain over the ensuing year.

"In fact, the CRR normalisation opens up space for a variety of market operations to inject additional liquidity. The underlying theme of our endeavour in these areas would be to flexibly use all instruments in our arsenal appropriately without jeopardising financial stability, which is at the core of RBI's policy objectives," the Governor said.

CRR for banks will be restored to 3.5 per cent from 3 per cent currently effective from March 27, 2021 and to 4 per cent from May 22, 2021.

Also read: RBI MPC meet: GDP estimated to grow at 10.5% in FY22

URL for this article :
@ Copyright 2019 India Today Group.