Context:
Liquidity management will be the main theme of the Monetary Policy review on behalf of central bank
Key Highlights:
- Economists of Standard Chartered Bank and ICICI Securities Primary Dealership expect a cash reserve ratio cut.
- The central bank may also conduct long term repo operations or open market operations (OMO purchases), for injecting liquidity into the financial systems
- Headline liquidity appears to in a deficit of 1 lakh crore to 1.5 lakh crore. Durable liquidity would be marginally negative on account of the seasonal upturn in currency-in-circulation combined with advance tax payments and outflows from reserves of foreign currency.
- 25 basis points cut in CRR will inject ₹58,000 Crore liquidity into the banking system.
