RBI CUTS CRR
http://www.rbi.org.in/home.aspx
http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=26097
http://in.reuters.com/article/2012/03/09/india-rbi-crr-idINDEE82809520120309
How it works on bonds and long/short term
| Monetary/Liquidity Measures It has been decided to:
In order to mitigate tight liquidity conditions, the cash reserve ratio was reduced by 50 basis points in the Third Quarter Review (TQR) of January 2012, injecting primary liquidity of `315 billion into the banking system. The Reserve Bank also continued with the open market operations (OMOs), injecting primary liquidity of over `1,245 billion this financial year so far, of which `528 billion was injected after the TQR. Despite these measures, the liquidity deficit has remained large on account of both structural and frictional factors. This was reflected in the net average borrowing under the Reserve Bank's liquidity adjustment facility (LAF) rising from an average of `1,292 billion in January 2012 to `1,405 billion in February. Net injection of liquidity through LAF rose to a peak of `1,917 billion on March 1, 2012, though subsequently it declined to `1,273 billion on March 7, 2012. Further, the liquidity deficit is expected to increase significantly during the second week of March due to advance tax outflows and the usual frontloading of cash balances by banks with the Reserve Bank. Thus, the overall deficit in the system persists above the comfort level of the Reserve Bank. Accordingly, it has been decided to inject permanent primary liquidity into the system by reducing the CRR so as to ensure smooth flow of credit to productive sectors of the economy. As already announced, the Reserve Bank will provide its assessment of the macroeconomic situation in its Mid-Quarter Review to be published on March 15, 2012. Press Release : 2011-2012/1441 |
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