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  Business   Economy  25 Sep 2018  RBI needs to cut Cash Reserve Ratio to improve liquidity: govt official

RBI needs to cut Cash Reserve Ratio to improve liquidity: govt official

PTI
Published : Sep 25, 2018, 5:49 pm IST
Updated : Sep 25, 2018, 5:49 pm IST

The RBI has tools like OMO (Open Market Operations) to manage liquidity.

The RBI should consider lowering Cash Reserve Ratio (CRR) in addition to buying government bonds to ensure adequate liquidity, an official said on Tuesday.
 The RBI should consider lowering Cash Reserve Ratio (CRR) in addition to buying government bonds to ensure adequate liquidity, an official said on Tuesday.

New Delhi: The RBI should consider lowering Cash Reserve Ratio (CRR) in addition to buying government bonds to ensure adequate liquidity, an official said on Tuesday.

Concerned over volatility in the stock markets, the Reserve Bank and markets regulator Sebi had on Sunday said they were closely monitoring the developments in the financial sector and were ready to take appropriate actions.

 

"The RBI has tools like OMO (Open Market Operations) to manage liquidity. Also a CRR cut would ensure immediate liquidity in the market," the government official told reporters. The focus should now be on ensuring adequate liquidity in the system and "not jamming" the credit flow, he added. CRR, the percentage of deposits that banks have to park with the RBI in cash, currently stands at 4 per cent.

The central bank has kept the CRR unchanged since September 2013. Assuring lending support to non-banking financial companies, SBI Chairman Rajnish Kumar had Sunday said there was no concern on liquidity of such firms, amid ongoing debt crisis in IL&FS Group.

 

Shares of housing finance companies had come under sudden heavy selling pressure as investors raised concerns over rising cost of borrowing for the companies amid crisis at IL&FS.

The RBI is scheduled to conduct OMO on September 27 by buying Rs 10,000 crore worth government bonds, thus releasing liquidity into the system. Having lost 1,785.62 points in the last five trading sessions, the BSE Sensex rebounded 347 points Tuesday.

The 30-share index closed at 36,652.06, up by 347.04 points or 0.96 per cent in a volatile trade. It touched a high of 36,705.79 and a low of 36,064.10 in day trade.

Tags: cash reserve ratio, reserve bank of india, liquidity, government bonds, sebi, financial sector
Location: India, Delhi, New Delhi