Trading desks should prepare for much lower liquidity surpluses: B Prasanna

Expects rupee to trade in the range of 78-80 per US dollar in the near term because of still relatively weak BoP fundamentals

The recent sharp decline in surplus liquidity in the banking system could have been by Reserve Bank of India’s (RBI’s) design as it seeks to push up short-term money market rates and ward off speculation against the rupee, says B Prasanna, ICICI Bank’s head of global markets. As the three-day Monetary Policy Committee (MPC) meeting kicks off, in an interview to Bhaskar Dutta, Prasanna says with the central bank moving towards the removal of accommodation, trading desks should prepare for more frequent episodes of liquidity tightness. Edited excerpts:

Q. There has been much commentary, including from within the RBI itself,