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‘Liquidity is comfortable’

business Updated: Oct 27, 2009 22:17 IST

Hindustan Times
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The increase in SLR will not impact the liquidity position of the banking system and credit to the private sector says
Duvvuri Subbarao, Governor, RBI.

On inflation concerns

Taking into account the global trend in commodity prices and the domestic demand-supply balance, the base line projection for WPI inflation at end-March 2010 is placed at 6.5 per cent with an upward bias. This is higher than that of 5.0 per cent WPI inflation projected in the July 2009 review as the upside risks have materialised.

On increasing SLR to 25%

The increase in SLR will not impact the liquidity position of the banking system and credit to the private sector.

On credit demand

While underlying economic activity has picked up, credit demand remains muted because the access of financing from external and domestic non-bank sources has eased significantly. Banks felt that credit growth prospects remain favourable going forward.

On government borrowing

The management of the large government market borrowing programme in a non-disruptive manner has been a major challenge for the Reserve Bank.

This fiscal, the Centre has already completed over 80 per cent (Rs 3,19,911 crore) of its net market borrowing. States have mobilised Rs 58,683 crore.

On open market operations

Consistent with the accommodative monetary stance, RBI expanded its domestic assets through open market operations and unwinding of market stabilisation scheme securities to provide primary liquidity to support the borrowing programme.

On liquidity situation

The liquidity situation has remained comfortable since mid-November 2008.

Excerpted from the RBI governor’s statement and press conference on Tuesday.