Financial Daily from THE HINDU group of publications
Sunday, Dec 07, 2003
Financial Daily from THE HINDU group of publications Sunday, Dec 07, 2003 |
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Money & Banking
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RBI & Other Central Banks RBI calls meet to discuss liquidity facility, fund plan Our Bureau
Mumbai , Dec 6 THE Reserve Bank of India has called a meeting of treasury heads and Fixed Income Money Market and Derivatives Association of India (FIMMDA) on December 10, to discuss the reports on Liquidity Adjustment Facility and a stabilisation fund. The meeting to be chaired by Dr Rakesh Mohan, Deputy Governor of RBI, will be attended by senior market participants and officials from the Internal Debt Management Cell of the RBI. The two reports prepared by internal groups of the RBI aimed at managing the excess liquidity in the system were unveiled to the market for comments earlier this week. "The meeting will be a very preliminary one; we will seek some clarifications on what will be the ceiling for repo acceptance, if at all. Enquiries will also be made on the finer details on the proposed market stabilisation fund,'' said a chief dealer in a bond house. "We will seek a timetable from the central bank as to how and when they plan to implement the new suggested instruments,'' said a senior banker. The report had suggested the setting up of a market stabilisation fund, which will issue stabilisation bonds and also a standing deposit facility to absorb the excess rupee liquidity in the system being created as a result of the unabated dollar inflow. These new instruments are to be used in addition to the current liquidity management tool, the Liquidity Adjustment Facility through which the apex bank conducts repos and reverse repo operations with market players. The market is of the opinion that it will take a minimum of 6-12 months for any of these newly recommended tools to be implemented especially since many of them need amendments in the RBI Act. Perhaps the apex bank's view is that the torrent of dollar inflow may continue for sustained periods with sustained interest of FIIs in the stock markets and therefore the need to devise the new instruments.
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