New Delhi : The Reserve Bank of India on Tuesday hinted at the possibility of another cut in the CRR (cash reserve ratio) during its mid-quarter monetary policy in March in case pressure on the liquidity situation persists till then. Interacting with the media on the sidelines of a National Housing Board function here, RBI Deputy Governor Subir Gokarn said: “We are watching the liquidity situation ... I think that decision [another cut in CRR] will be taken when we do our mid-quarter review ... Having done one, I think the possibility of another is always on the table.” After raising the key policy rates over a dozen times since March 2010 to tame inflation by making bank credit costlier, the RBI effected a pause on rate hikes during its policy review on January 24 and instead went in for a cut in CRR by 50 basis points to 5.5 per cent so as to ease liquidity and spur growth. The CRR cut with effect from January 28 released a part of the funds that banks are mandated to park with the apex bank and resulted in additional liquidity to the extent of Rs. 32,000 crore. However, with liquidity pressures still persisting, Dr. Subir Gokarn indicated that the RBI would undertake ‘Open Market Operations' (OMOs) to pump in more funds into the monetary system to meet the increasing demand. Dr. Gokarn noted that the RBI's rate actions in future would depend on the trajectory of headline inflation in the coming months.
HBL
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