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The response to Friday's open market operations suggests that the RBI can use it as an option to address liquidity pressure, said the RBI Deputy Governor, Dr Subir Gokarn.
Delivering the keynote address at the Bankers' Club in Bangalore on Friday, he said that the response of Rs 9,700 crore for the OMO for an offer of Rs 12,000 crore suggested that OMOs “clearly remain an option on the table” for the RBI.
However, CRR was an instrument of choice for liquidity infusion instead of a number of OMOs which will infuse liquidity in small doses, he said.
The divergence of credit and deposit growth was also contributing to liquidity deficit, he said.
Structural pressures can't be resolved overnight, and CRR cuts were aimed at easing this pressure.
Explaining the RBI's monetary policy stance, he said, “What we are doing is using the interest rate tool to tighten the demand, and CRR as a liquidity solution when there is a pressure.” However, liquidity infusion is not a solution to the problems directly, and it's a matter of time “before we realise the effectiveness of these solutions,” said Dr Gokarn.
The primary focus of the monetary policy will remain inflation, he pointed out.
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