RBI says will continue to undertake liquidity management operations
The Reserve Bank of India (RBI) said on Thursday it will continue to undertake liquidity management operations in sync with the monetary policy stance
- NEW DELHI — The Reserve Bank of India (RBI) said on Thursday it will continue
to undertake liquidity management operations in sync with the monetary policy
stance to keep system liquidity adequate to meet the productive requirements of
the economy.
-
- A benign inflation outlook and moderate growth warrant a
monetary policy to be growth-supportive, while remaining watchful about the
rapidly evolving global macroeconomic conditions, said the Central Bank in its
2024-25 annual report.
-
- “It will deploy an appropriate mix of instruments to
modulate frictional as well as durable liquidity, ensuring orderly movement of
money market interest rates,” said the Reserve Bank.
-
- With inflation falling below the target in February and
March 2025, supported by a sharp fall in food inflation, there is now greater
confidence about a durable alignment of headline inflation with the target of
4.0 per cent over a 12-month horizon.
-
- Accordingly, the RBI MPC in its April meeting unanimously
voted to reduce the policy repo rate by 25 bps to 6.0 per cent. Moreover, the
MPC also decided to change the stance from neutral to accommodative.
-
- Inflation converged closer towards the target during
2024-25, aided by easing input cost pressures, proactive supply management
measures by the government and continuing transmission of past monetary policy
actions.
-
- Headline inflation moderated to an average of 4.6 per
cent during 2024-25 from 5.4 per cent in the previous year, largely driven by a
moderation in core (CPI excluding food and fuel) inflation to 3.5 per cent and
deflation in fuel at 2.5 per cent. The moderation in core inflation was
broad-based across goods and services, said the RBI.
-
- For the year as a whole, liquidity conditions remained in
surplus as reflected in average daily net absorption under the liquidity
adjustment facility (LAF), increasing to Rs 1,605 crore during 2024-25 from Rs
485 crore in the previous year.
-
- The Reserve Bank conducted a suite of market operations,
including open market operation (OMO) purchases, USD/INR buy/sell swaps, and
longer tenor variable rate repo (VRR) operations, besides reducing the cash
reserve ratio (CRR) by 50 bps (in two tranches of 25 bps each), to provide
durable liquidity to the system.
