RBI may cut key debt ratio for lenders in next fiscal year
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.
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