Liquidity condition in economy easing: Govt

Measures like monetary support to scheduled commercial banks and reducing the issuance of treasury bills by Rs 22,000 crore have led to the easing of the liquidity position since last month, Parliament was informed today.

"The Reserve Bank of India took several measures to ease the liquidity conditions...These measures helped ease the liquidity pressures and the liquidity position has improved since end-July 2010," Minister of State for Finance S S Palanimanickam said in a written reply to the Lok Sabha.

The minister said additional liquidity support under the RBI's liquidity adjustment facility (LAF) has been provided to scheduled commercial banks, to the tune of 0.5 per cent of their net demand and time liabilities besides extending a second LAF on a daily basis.

LAF is a tool used in monetary policy that allows banks to borrow money from RBI through repurchase agreements.

"Besides, in consultation with the government, the notified amounts for the issuance of treasury bills was reduced by Rs 22,000 crore during June 2010," he said.

The government also bought back Rs 9,614 crore worth of securities during the one week period in June 16-22, ahead of their scheduled date.

In reply to another question, Palanimanickam said that there has been no decision on deregulating interest rate on savings bank deposits.

"The issue to deregulate interest rate on saving bank accounts has arisen from time to time. However, the RBI has not decided to deregulate interest rate on savings bank deposits so far," he said