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Saturday, September 5, 2009
As liquidity remains ample, the competitive pressure on banks to reduce lending rates has increased. Consequently, the transmission of policy rate changes to bank lending rates has improved. As the short-term deposits contracted earlier at high rates mature and get repriced, it opens up room for banks to further reduce their lending rates.
FollOWing the crisis, the government deviated from the road map for fiscal consolidation. The deficit indicators deteriorated sharply in 2008-09 and are projected to be even higher in 200910. These are budgeted to increase further by nearly 34% in 2009-10.
Management of the large market borrOWing program in a nondisruptive manner requires active liquidity management and, accordingly, the RBI indicated its intention to purchase government securities under open market operations (OMO) for an indicative amount of Rs 80,000 cr during the first half of 2009-10. During the first half of 2009-10, net market borroWing of the central government through dated securities will be Rs 265,911 cr, of which nearly 63()11 (Rs 167,911 cr) has been completed by July 27, 2009 and an additional amount of Rs 28,000 cr has been raised through desequestering desequestering MSS balances. During the first half of 2009-10, proposed OMO purchases and MSS unWinding will add primary liquidity of Rs 150,000 cr, which by way'of monetary impact is eqUivalent to reduction of CRR by over 3.5% points.
FollOWing the crisis, the government deviated from the road map for fiscal consolidation. The deficit indicators deteriorated sharply in 2008-09 and are projected to be even higher in 200910. These are budgeted to increase further by nearly 34% in 2009-10.
Management of the large market borrOWing program in a nondisruptive manner requires active liquidity management and, accordingly, the RBI indicated its intention to purchase government securities under open market operations (OMO) for an indicative amount of Rs 80,000 cr during the first half of 2009-10. During the first half of 2009-10, net market borroWing of the central government through dated securities will be Rs 265,911 cr, of which nearly 63()11 (Rs 167,911 cr) has been completed by July 27, 2009 and an additional amount of Rs 28,000 cr has been raised through desequestering desequestering MSS balances. During the first half of 2009-10, proposed OMO purchases and MSS unWinding will add primary liquidity of Rs 150,000 cr, which by way'of monetary impact is eqUivalent to reduction of CRR by over 3.5% points.
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