Informist, Wednesday, May 4, 2022

MUMBAI – The Reserve Bank of India today announced a 50-basis-point hike in cash reserve ratio maintained by banks to 4.50% of net demand and time liabilities effective from the fortnight beginning May 21.

The hike in CRR will result in withdrawal of liquidity worth 870 bln rupees.

The Monetary Policy Committee in an off-cycle meeting today unanimously hiked the repo rate by 40 basis points to 4.40%, while voting to continue with an accommodative stance with focus on withdrawal of COVID-19 linked accommodations. 

"Liquidity conditions need to be modulated in line with the policy action and stance to ensure their full and efficient transmission to the rest of the economy," Reserve Bank of India Governor Shaktikanta Das said in a statement today.

Das further said that the favourable response of banks as evident in bid-cover ratios of 14-day and 28-day variable rate reverse repo auctions as well as the dollar/rupee sell-buy swap auction conducted in April also suggest that system-level liquidity remains ample.

Average surplus liquidity in the banking system as reflected in total absorption through standing deposit facility and variable rate reverse repo auctions amounted to 7.5 trln rupee during April 8-29, the RBI said.

The RBI highlighted that the large liquidity overhang in the form of daily surplus funds parked under the standing deposit facility has resulted in the weighted average call money rate--the operating target of monetary policy--dipping below the SDF rate of 3.75%.   End

Reported by Richard Fargose

Edited by Arshad Hussain

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