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RBI's liquidity measures: Bankers and economists weigh in on Indian version of quantitative easing

Updated : April 07, 2021 06:56 PM IST

The Reserve Bank of India (RBI) announced aggressive liquidity measures to assuage market uncertainty over large government borrowing and also kept rates unchanged and retained its 'accommodative' policy stance.

The Reserve Bank of India stunned the market with an Indian version of a quantitative easing programme. The RBI will conduct a government bond-buying programme amounting to Rs 1 lakh crore in the first quarter of this financial year.

Also, the governor said this will not be a one-off measure putting liquidity front and centre as the economy attempts to rebound.

To discuss this CS Shetty, Managing Director at SBI, Pranjul Bhandari, Managing Director and Chief India Economist at HSBC, Samiran Chakraborty, Chief Economist at Citi and B Prasanna, Head of the Global Markets Division at ICICI Bank.

B Prasanna said, “Liquidity was the most important part of this policy and an important measures that they have announced which led me to say that flattening of the curve is the name of the game. The first is on the variable rate reverse repo (VRRR) which clearly indicates that there is possibly going to be a little bit more aggressive measures from the Reserve Bank in terms of taking out money in the form of maybe 28 days or 60 days or 90 days VRRR announcement.”

Chakraborty said, “The key question on growth that RBI has struggled with is how long would this COVID situation persist and although at this point of time the high-frequency indicators are not showing any significant deterioration as yet. But would that be somewhat a lag effect of all these second wave on the growth number, that uncertainty must have pushed RBI into keeping their growth forecast same as before.”

Watch the video for the in-depth analysis

Published : April 07, 2021 06:54 PM IST

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