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Liquidity not an issue: RBI
By agencies
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Thursday, 10 November 2005, 20:30 IST
MUMBAI: Reserve Bank of India deputy governor Rakesh Mohan has said that liquidity in the banking system was not an issue and the central bank could use the market stabilization scheme (MSS) to manage it.
Cash surpluses have dwindled as banks lent more to companies to help pay annual festival bonuses to staff and due to outflows to federal bond issues of $1.7 billion.
"The overall liquidity ... there is no issue," Mohan said. "If you look at the MSS and the liquidity adjustment facility. Yes, there has been a drop. But given the liquidity in the MSS, there is no issue with liquidity."
"The MSS is designed to manage liquidity," Mohan said when asked if the central bank would cancel some issuance under the scheme. "So obviously, we will manage liquidity as necessary, according to market conditions."