The Reserve Bank of India (RBI) will probably retain a surplus of liquidity in the banking system and proclaim another round of bond purchases, but will avoid adding marginal cash in the near future, two sources reported.
Funds parked with the Reserve Bank of India (RBI), in its reserve repo window, have averaged about 7 trillion rupees ($95 billion), while the government's cash balances with the central bank are about 3.4 trillion.
This fiscal 12 months, the RBI acquired bonds valuing Rs 2,05,000 crore in auctions forming a part of its Government Securities Acquisitions Programme (GSAP).
"All our objectives with surplus liquidity are not yet met," said a senior government source directly aware of the matter.
"For example, credit growth is not at desirable levels and this needs to increase, for which surplus liquidity is something we need," added the source, who asked not to be identified as he was not authorised to speak to the media.
Most market participants expect the RBI to announce more bond purchases to help absorb the government’s programme of borrowing to the tune of Rs 1,206,000 crore.
"The RBI may not want to add to it anymore, but we don't think they are going to undertake measures to permanently withdraw liquidity," said Suyash Choudhary, head of fixed income at IDFC Asset Management.
