These moves are expected to increase cash in the financial system and help push interest rates down, potentially helping borrowers where an interest rate cut has not.
Business
Standard : The Reserve Bank of India (RBI) will probably
conduct at least one more swap of rupees for dollars after the
general
election, said three officials with direct knowledge of the plan,
part of an effort to support economic growth.
The
central bank also plans to conduct open market operations of up to Rs
500 billion over the next two months, one of the officials said,
expanding a quantitative easing programme to spur the slowing
economy.
These
latest moves are expected to increase cash in the financial system
and help push interest rates down, potentially helping borrowers
where an interest rate cut has not.
"We
want to make sufficient liquidity available, but we cannot open the
floodgates of liquidity. It has to be done in a calibrated and
measured way," said one official who declined to be named
because of the sensitivity of the matter.
The
Reserve
Bank of India declined to comment.
Prime
Minister Narendra Modi is facing a tight re-election race in the
staggered poll that began on April 11 and will end on May 19. Votes
will be counted on May 23.
Economic
growth slowed to 6.6 percent in the October-December quarter, the
worst in five quarters, and economists see a further slowdown in
January-March largely due to high interest rates and surging oil
prices.
Despite
cutting its key policy rate by 50 basis points this year to 6
percent, the RBI has struggled to get banks to reduce lending rates
due to tight cash conditions and high deposit rates.
The
RBI wants the real interest rate - the delta between the inflation
rate and rate people pay to borrow - to ease for borrowers, a
separate government official said.
In
May, the RBI announced a fresh round of open market operations to
purchase a total of Rs 250 billion worth of bonds in May, with the
first auction for 125 billion rupees held on May 2.
"There
could be two to four more open market operations by the RBI in the
next two months (June-July) of similar quantum," the second
official said.
"We
are also in discussions for more forex swaps after the elections,"
he added.
A
third official said the RBI would probably review the amount of
rupees in circulation in June and determine the liquidity required by
the banking system before finalising details of the rupees for
dollars swap auction.
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