RBI intends to keep cash in deficit

The Reserve Bank of India has no current plans to take new steps to ease cash conditions further and it expects an unwinding of the factors contributing to the shortfall in the months ahead, its chief said on Thursday

The Reserve Bank India (RBI) on Tuesday raised its repo rate , at which it lends to banks, to 6.5 percent from 6.25 percent. It also lifted the reverse repo rate , at which it borrows from banks, to 5.5 percent from 5.25 percent.

The RBI also raised its inflation forecast for the current fiscal year to end-March to 7 percent from 5.5 percent and warned of persistently higher food prices unless steps are taken to boost supplies.

RBI GOVERNOR DUVVURI SUBBARAO said "We have maintained in the November policy that we expect to see LAF (liquidity adjustment facility) window in the deficit mode for some more months to come, so that is consistent with our anti-inflationary stance. So, I do not see the possibility of it (LAF) getting into a surplus.

"But, we certainly want it to be in a less deficit than it is now because deficit right now is around 2 percent of net demand and time liabilities and we think that the more appropriate level would be 1 percent and that is where we would like it to be."

RBI DEPUTY GOVERNOR SHYAMALA GOPINATH  said “Treasury bill issuances of the government are primarily based on the intra-year mismatches in receipts and payments... these instruments provide investment opportunities for those who have short-term funds and generally the government has not really had any problems raising any funds by way of tbills.”

Unitedworld Executive.