RBI hints at more bond sales; links rollback with Re stability

RBI's liquidity squeezing measures will continue and they will be reversed only once the rupee is stabilised, Governor D Subbarao today said hinting at more tightenings through bond sales.

'It is difficult to attach a time-lime to do that (rollback the higher rates). All we said was that these measures will be rolled back in a calibrated manner as stability is restored to the foreign exchange market,' he told analysts during the customary post-policy conference call here.

He said the central bank will continue with sale of government bonds through open market operations to maintain tightness in liquidity.

'...(OMO sale) might see in the future, you know that OMO sale is part of this package of tightening,' the RBI Governor said.

Earlier this month, the rupee fell to record low of 61.21 against the dollar, which prompted RBI to take steps to curb speculation in forex market by way of draining out liquidity from the system.

Yesterday, the rupee wiped out all it gians since July 15, the day it began tightening, to close 60.47 to a dollar. And today it lost further ground intra-day touching 61.17. However, the currency gained 7 paise to close at 60.40 at the end of the trade.

The Reserve Bank had steeply raised the marginal standing facility rate and the bank rate, restricted access to borrowing under liquidity adjustment facility, stipulated higher daily maintenance of cash reserve ratio and undertook open market sales of government securities.

Talking about forex reserves position, RBI Deputy Governor Urijit Patel said the reserves are adequate.

'Not only do we feel, but international agencies like IMF, and by the criteria they use, think that our reserve position is adequate and comfortable. We certainly feel that is the case,' he said.