Steps being taken to ease liquidity constraints: Subbarao

Reserve Bank Governor D Subbarao today said that there were liquidity constraints "either in some banks or in the system" and steps were being taken to ease the situation.

Briefing reporters after the bank's central board meeting here, Subbarao said, "RBI wanted that liquidity should remain within plus/minus one per cent of net demand and time liabilities which amounted to approximately Rs 60,000 crore".

"In the last week this had gone beyond that, which means that there are liquidity constraints either in some banks or in the system," he said.

 Regarding a cut in CRR, he said "I cannot really react to what the market is expecting".

"So whatever we might decide on CRR or otherwise will be announced in mid-quarter statement", he said.

 Cash reserve ratio interest-free cash that banks park with the central bank as a measure of their solvency. The last time the RBI tweaked the CRR was in May 2010 and since then it has been pegged at 6 per cent. Banks are mandated to park 6 per cent of their assets as reserves with the central bank.

Subbarao said RBI had taken steps to ease the situation like conduction open market operations.

He said that RBI was monitoring the liquidity position on a daily basis and would take steps to ease the situation by taking appropriate measures.

Regarding cut in CRR, he said "I cannot really react to what the market is expecting".

"So whatever we might decide on CRR or otherwise will be announced in mid-quarter statement", he said.