Rupee Impact: We need immediate liquidity

The FM was fiscally positive in tone earlier today reiterating that a lot of pressure would be released on the

Subir Gokarn (PhD alumnus), current Deputy Gov...
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government from reduction in Energy prices and subsidies due on Fertiliser, Oil and Energy. To expect inflation to subside to 7%, unfortunately it looks little more than the ineffective posturing politicians have to resort to as the mouthpieces of a government working with is hands tied. What is immediately needed is good liquidity in the money markets and the inter bank markets otherwise yields could climb even further from 9.1% of last weak

RBI has immediately opened a Floating Rate Bond sale that would help but probably needs to look at reducing CRR/SLR options as well and probably release at least 500 bln from banking reserves of more than INR 45 Tln that banks have handed over to it.

Reserve Bank of India is poised to issue floating-rate bonds (FRBs) — for the first time in two years. Come this Friday, and the country’s central bank will reissue Rs 3,000 crore worth of FRBs that are set to mature in 2020.(BS)

10 year bonds, in the new series issued last week are already trading lower at 8.74% after the announcement but much more needs to be done as the pressure on the rupee is unlikely to be let up

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