Steps to address liquidity issue will continue, says Gokarn

Last Updated: Fri, Dec 07, 2012 21:01 hrs

pThe Reserve Bank of India RBI will continue to take steps to address the deficit in the banking system liquidity Deputy Governor Subir Gokarn said here on Fridaypp&ldquoWe are doing an OMO open market operation of Rs 12000 crore on Tuesday That is based on the assessment of current liquidity situation The issue of government balance is also being taken into account We are seeing some stress and are responding to that&rdquo Gokarn told reporters on the sidelines of an event organised by the Confederation of Indian Industry CIIppThe OMO on December 11 2012 will see RBI buying Rs 12000 crore of securities that will mature in 2017 2020 2022 and 2026 The central bank has bought securities worth Rs 93643 crore so far this financial yearppGokarn added there might be further stress on the system liquidity as advance tax payments were due next weekpp&ldquoIt is our ongoing attempt to assess liquidity situation and make sure the pressure is not severe&rdquo he saidppHe hinted OMO would be the preferred route for the regulator to tackle liquidity deficit &ldquoOMO gives us the flexibility to respond in very short order to the stresses So if we see them remaining in the system then we have the capacity to respond&rdquo Gokarn saidppGokarn also suggested the situation was not alarming and the liquidity deficit was still within RBI&rsquos comfort zone &ldquoI think ultimately we have to look at the call rate as an indication of where the stresses are It has been close to the repo rate which is the objective It has not shot up which would suggest that liquidity deficit is within comfort zone" he saidppSeparately he reiterated that inflationary pressures are likely to ease from next quarterppGokarn was hopeful that there will be some stability in the local currency exchange rate in the near-term as depreciation of rupee contributes to inflationary pressurespp"Whatever causes it whether due to political developments or global developments rupee depreciation contributes to inflation &ndash particularly through its impact on unavoidable imports like oil So that concerns remain and it is not something we refuse to acknowledge We hope that things stabilise both on domestic and global fronts where the rupee finds some stability&rdquo he saidp

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