The Hindu Business Line : `RBI will manage liquidity through range of tools'

ACUTARIES MEET: (From left) Mr D. Swarup, Chairman, PFRDA; Dr Y. V. Reddy, Governor, RBI; and Mr Jean Louis Masse, President, International Actuarial Association, at the 8th Global Conference of Actuaries in Mumbai on Friday. - Shashi Ashiwal

Mumbai , March 10

There is no excess volatility in the market and the concern about liquidity this month is normal, said Dr Y.V. Reddy, Governor, Reserve Bank of India.

"Advance tax flows can put some pressure on liquidity in March," he said. However, the easing of call rates was reflective of the liquidity conditions.

Speaking to newspersons on the sidelines of a press conference, Dr Reddy said that the RBI would continue to undertake monetary operations consistent with the interest rate regime.

RBI has injected sufficient liquidity in the last of couple of months and would continue to do so through a package of instruments. Buying of dollars by the RBI in the last few weeks and private placement of bonds by the Government had helped ease liquidity.

Dr Reddy said measures such as Open Market Operations on the Negotiated Dealing and System-Order Matching platform would help ensure financial stability. "We are in a position to intensify activities of OMO in the NDS," Dr Reddy said.

While assessing the short-term rates, the CBLO should also be considered as it accounts for significant short-term operations, he said. The rates in the CBLO and call are within the corridor, he added.

About the market's fear that the conversion of re-capitalisation bonds into SLR bonds would put pressure on interest rates, Dr Reddy said it would not happen this year. "It will happen next year and will be done over a period of time," he said. Earlier, addressing the eighth global conference of actuaries here, Dr Reddy said that global imbalances were posing high risks and the financial markets had not factored in these risks.

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