Citi expects more liquidity easing steps by RBI

With global financial conditions unlikely to improve shortly, financial services major Citigroup today said the Reserve Bank of India (RBI) is likely to further cut policy rates as well as reserve ratios and launch NRI deposit scheme to inject more liquidity into the system.

"Given that global conditions could take a while to improve, we expected continued action to help mitigate the impact of the global crisis on the domestic economy. We are likely to see further CRR/SLR/repo cuts as well as cuts in the reverse repo/bank rate," Citi said in a report.

It expects further easing of the capital account norms, an NRI deposit scheme, temporary dollar liquidity support from international institutions and some fertilizer and oil bonds becoming eligible for SLR requirements.

The RBI on Saturday announced a slew of measures, including permission to housing finance firms to raise funds from overseas markets and raising the interest rate ceiling on foreign currency deposits, citing concern over the fast depleting foreign exchange reserves.

"The measures announced by the RBI are positive, in our view, and will help alleviate some of the stress being felt by these segments," the report said.

RBI had also raised the time-limit for availing low-cost export (pre-shipment) credit from 180 days to 270 days to encourage exports and promised to take more steps, if needed.

In last month, RBI has infused liquidity to the tune of Rs 2,70,000 crore by cutting the cash reserve ratio by 350 basis points and statutory liquidity ratio by 100 basis points.

RBI has already reduced repo rate by 150 basis points to 7.5 per cent from earlier level of 9 per cent last month.