Mumbai: Reserve Bank Governor D Subbarao on Monday said the Reserve Bank will consider all options available, including reducing the cash reserve ratio (CRR), to manage liquidity in the system. "The assumption that OMOs will be the preferred tool is wrong. Don't go with that assumption. We will use all options available to us depending on the liquidity situation... it could be OMOs, it could be CRR (cut) or it could be something else...," Subbarao told analysts during the customary post-policy conference call in Mumbai.
Stating that liquidity squeeze is likely to be 'less uncomfortable' in the coming months as the government starts spending, he said: "Our objective is to maintain liquidity at plus or minus 1 per cent of NDTL. We have actively managed liquidity conditions....and it should be less uncomfortable going forward. We have also indicated that we will actively manage liquidity. Consistent with that policy, we have announced an OMO of Rs 10,000 crore on Friday," Banks are borrowing close to Rs 90,000 crore from the RBI through the overnight window, which is above the central bank's comfortable level of 1 per cent of NDTL (net demand and time liabilities) at Rs 60,000 crore.
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