Y V Reddy, Governor of Reserve Bank of India (RBI), today said redemption of the $7.3 billion India Millennium Deposit (IMD) coming up on December 29 is likely to cause "frictional" pressure on liquidity."To the extent of the IMD redemption, some anticipatory pressure could be there (in the system), and that would be what I may call frictional," Reddy said.Pointing out that there is an increased demand for liquidity in the system, he said the central bank had been watching the developments carefully."There is an increased demand for liquidity in the system. The matter is being closely watched by the RBI. At this point, there is every reason to believe the overall liquidity conditions in all markets are orderly," he added.As per the arrangement made by RBI, it would sell forex to SBI at the prevailing market rate to meet the redemption of IMD.The rupee consideration, which is likely to be around Rs 33,000 crore, will be paid by SBI, which has already taken adequate steps to purchase foreign exchange from RBI.The exchange loss, if any, on account of depreciation of the rupee would be shared between SBI and the central government.
