RBI committed to ensuring liquidity

RBI committed to ensuring liquidity

New Delhi: India’s central bank is committed to ensuring adequate liquidity in all the country’s financial markets, its deputy governor, Rakesh Mohan, said on Monday.

“As you have seen in the last five weeks, we have been acting on a consistent basis to make sure financial markets work efficiently, that adequate liquidity is available in the system and also that credit flows smoothly given the current global and Indian economic conditions," he said before a business conference.

The Reserve Bank of India has taken a string of measures over the past few weeks to improve liquidity and boost growth, cutting its key lending rate - the repo - by 150 basis points to 7.5% and lowering banks’ reserve requirements.

The central bank expects the economy to grow 7.5-8% in 2008/09 fiscal year, slowing from rates of around 9 percent in each of the last three financial years.

RBI said it will conduct a special 14-day repo auction for $11.1 billion on Monday.

The reversal of Monday’s auction will take place on 1 December, it said in a statement.

The special repo facility was introduced on 14 October to meet liquidity needs of mutual funds for an allocated Rs20,000 crore.

RBI has increased the facility to Rs60,000 crore to include liquidity needs of non-banking financial companies, and said it would be held every day until further notice.