The Reserve Bank of India (RBI) governor Bimal Jalan today said interest rates in the economy were soft and liquidity in the banking system comfortable.
Jalan said the central bank was closely monitoring the situation on the liquidity front. When asked whether the RBI would conduct open market operation (OMO) sales of securities to suck out excess funds from the banking system, the governor just said that the central bank's action would be dictated by the situation prevailing.
Jalan said the 5.75 percent repo rate was sustainable in the long run. When asked if the RBI would take more devolvements in government securities auctions, he said, "If necessary, yes."
Jalan also said the devolvement at Wednesday's auction of 8.07 per cent 2017 security was not a signal on interest rates. "The market must have made a judgement on the interest rates. There was not much demand for the paper for the 8.07 per cent paper."
On July 17, the auction of 8.07 per cent 2017 paper saw 61 per cent of the notified amount of Rs 4,000 crore devolving on the Reserve Bank of India and the primary dealers. On the primary dealers the devolvement was to the extent of 32 per cent (Rs 1,285 crore), while the rest (Rs 1,157 crore) was devolved on the central bank itself.
Immediately after the governor's comment on repo rate and devolvement the rally witnessed in government securities prices since morning halted and prices drifted into a range bound mode in noon trades.
Speaking at the North East Business Summit, Jalan said despite the availability of funds, the region remained under-developed as there was a problem of awareness and perception.
He concurred with the point of M K Sharma, vice-chairman, Hindustan Lever, of developing the region into an export processing zone for economic development.
Utilities in the public sector like power, transport, irrigation, water, etc were inefficient due to lack of accountability, Jalan said.
He said this lack of accountability in the public sector led to decline in productivity and efficiency levels which, in turn, resulted in huge costs.
