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No signs of stress, liquidity position comfortable: RBI

Reserve Bank of India deputy governor Subir Gokarn on Monday said the current liquidity condition is comfortable, and the currency market has remained stable for the past several weeks.

Reserve Bank of India (RBI) deputy governor Subir Gokarn on Monday said the current liquidity condition is comfortable, and the currency market has remained stable for the past several weeks. Speaking on the sidelines of a seminar organised by the Indian Institute of Foreign Trade, Gokarn said an announcement by the European Central Bank (ECB) to buy government bonds has provided comfort to investors across the globe including in India.

Besides ensuring liquidity in the markets, he said, the ECB decision ? to potentially buy unlimited amount of sovereign bonds ? would provide assurance that the European bond markets would remain stable. Gokarn did not provide any indication of the likely policy move of the central bank. RBI will unveil its mid-quarter review of the monetary policy on September 17.

He said, ?RBI would take note of emergence of signs of stress, particularly if they are likely to be persistent. We have for quite some time realised there was stress in the market both in terms of quantity of LAF (Liquidity Adjustment Facility) borrowings and in terms of the behaviour of the call rate which is the number we look at.?

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?There are no signs of stress at the moment,? he said, indicating that there would be no change in the cash reserve ratio (CRR) position.

He said RBI would study the inflation data to take a call on policy rates. August inflation data is expected to be released on September 14. The wholesale price index (WPI) based inflation slipped to 6.87% in July from 7.25% in June. GDP grew mildly above expectations at 5.5% in April-June quarter.

On currency fluctuation, Gokarn said: ?Over last several weeks, the currency has been relatively stable (as) there is a rough balance between inflows and outflows. We are obviously monitoring the situation and will react to it as appropriate.? RBI had intervened in the foreign currency markets and taken administrative steps to check volatility in rupee-dollar exchange rate. The government recently allowed foreign investors to buy higher amount of government bonds, and permitted qualified foreign investors to invest directly into Indian stocks and corporate bonds.

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First published on: 11-09-2012 at 20:52 IST