(Repeats story issued on Saturday with no changes to text)
COLOMBO, Feb 2 (Reuters) - India's central bank is
considering cutting the held-to-maturity (HTM) ratio for lenders
starting in April, while also looking into bond purchases via
open market operations in the next two months to improve
liquidity, a top official said on Saturday.
A cut in HTM - which is a type of debt that banks must be
hold till maturity - is aimed at spurring banks to lend more and
boost a sluggish economy poised to grow at its slowest pace in a
The limit is currently set at 25 percent but traditionally
has been aligned with the banks' statutory liquidity ratio
(SLR), or the mandated portion of deposits which banks must
invest in government bonds and other approved securities, which
is currently at 23 percent.
"Maybe we can do it in a phased manner, quarterly basis,
half yearly basis till the time it is phased out," Reserve Bank
of India deputy governor H.R. Khan told Reuters on the sidelines
of a conference in Colombo, regarding reducing the gap between
the SLR and HTM ratios.
"Implementation could be from early next year," he added,
referring to the fiscal year that starts in April.
The RBI uses several tools to manage the country's
persistent cash deficit, including requiring banks to hold onto
different categories of debt via the HTM and SLR ratios or
buying bonds from investors. The HTM can be reshuffled after
obtaining the central bank's permission.
The RBI had said in October it was looking into a
recommendation from a central bank committee to cut the HTM
ceiling, bringing it in line with the SLR.
Traders have said a reduction in the HTM limit could hit
bond prices, given debt supply would increase as banks would be
allowed to sell some of their tied-up securities.
Concerns about India's liquidity deficit have been
exacerbated in recent days as the government has been cutting
spending to meet its fiscal deficit target of 5.3 percent for
the fiscal year ending in March.
As a result, India's bond yields rose to a near one-month
high on Friday.
The RBI on Jan. 29 cut the cash reserve ratio (CRR), yet
another liquidity tool through which the central bank sets the
amount of cash deposits that lenders must hold.
However, the action disappointed investors, who had hoped
the RBI would also inject liquidity via bond purchases conducted
through open market operations (OMOs), which would most directly
benefit debt markets.
Khan said the RBI could still resort to OMOs in February and
March, the last two months of the current fiscal year, and was
watching government spending.
"As things pan out we will see and if it is becoming a
pattern we will do OMOs in addition to CRR," Khan said referring
to reduced government spending.
"There could be OMOs in the next 2 months," he added.
(Reporting by Archana Narayanan; Writing by Rafael Nam in
MUMBAI; Editing by Sanjeev Miglani)