Mumbai: The Reserve Bank feels that liquidity in the system is comfortable and therefore it does not anticipate any intervention in the form of an open market operations (OMO) in the near future.
"We don't anticipate that kind of a situation (shortage of liquidity) to emerge and will keep a watch on it," RBI Deputy Governor Subir Gokarn told reporters at the customary post-policy meeting.
He said the current strain on liquidity is a seasonal phenomenon. "The current situation is simply a seasonal effect. We do expect (that) during the Diwali period, there is high demand for money... So, banks have to rely on repo to meet the CRR requirements. This money will come back to the system sooner."
Gokarn added that the week preceding Diwali week, there was a daily transaction of around Rs 40,000 to Rs 50,000 crore, which is in a comfortable range of the central bank.
As per the monetary authority, liquidity in the banking system should be maintained at 1 percent above or below the deposit base.
"Obviously, that is the signal we have sent out with the 1 percent. If that persistently stays above that number, that provides us some basis to act," he said, adding but RBI will not intervene only to check rising yield in G-Sec.
"OMOs will not be conducted to keep yields down. It will only be initiated, if at all, for liquidity management. Though it has a bearing on the yield, it can't be used primarily for yield," he added.

Recently, 10-year benchmark G-Sec yield touched a high of 8.83 percent, which is around 10 bps higher than the usual yield in anticipation of further liquidity squeeze by RBI.    On the rising government borrowing, Gokarn said the major challenge in managing Government borrowing is balancing the domestic liquidity situation.
The Government last month announced to borrow additional Rs 53,000 crore from the market to fund its expenditure in the second half of this fiscal, which translates into around Rs 12,000 to Rs 15,000 crore of bond supply to the market per week.
About the possibility of intervention in the forex market, Gokarn said the RBI will not intervene to check the fluctuation in the rupee. "We don't intervene with a fixed exchange rate in mind. If, at all we intervene, it will be to manage volatility," he said, adding currencies of all emerging markets (EMs) have depreciated in the recent past.
Among the EM currencies, it is the rupee that has been battered the most. The rupee has lost over 11 percent between August 5, when the US was downgraded, and October 21 against the dollar as investors seek safe haven option in greenback.
Gokarn, however, said the rupee is likely to reverse its fall with reduction in the uncertainty in the eurozone.    

"Currency movement is so pronounced and so sharp because of uncertainty about resolution in Europe (debt crisis). When this uncertainty reduces, this pattern will reverse."
Gokarn pointed out that inflation is likely to moderate in the near future on the back of higher base effect and various other factors.

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