'OMO auctions a positive from the RBI policy'

Indranil Pan, Chief Economist, Kotak Mahindra Bank talks to Krishna Merchant on today's RBI policy review and the likely impact.

Was the Reserve Bank of India's mid-quarter policy in-line with your expectation?

The policy was in-line on the rate front. We were not looking at the open market operation (OMO) auctions expansion that RBI has announced. This is definitely a positive out of the policy.

How do you see liquidity panning out given the statutory liquidity ratio (SLR) reduction of 1% and open market operation (OMO) auctions worth Rs 48,000 crore?

The RBI has said that they need liquidity at plus/minus 1 per cent of net demand and time liabilities (NDTL). This will bring us close to 1 per cent of NDTL. The RBI does not want to signal a positive liquidity scenario because we are still in ant-inflationary mode.

However, given the current liquidity deficit of about Rs 1,00,000 - 1,10,000 crore, the liquidity infusion of Rs 48,000 crore will definitely help.

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