The private demand is still not picking up and the funds under market stabilisation scheme are also maturing.
The department of economic affairs in the Union finance ministry has suggested aggressive sterilisation of foreign capital inflows, tightening of government expenditure and intervention in key farm produce markets like wheat.
Reserve Bank of India governor Y V Reddy defended his decision to keep the rates unchanged by saying that all stakeholders should pay an uncertainty premia during uncertain times.
The decision to transfer the funds was taken after reviewing the cash position, the RBI said. It may be recalled that the outstanding borrowing of the government from the RBI was Rs 40,412 crore. This was more than the limit of Rs 20,000 crore set under the agreement for ways and means advances. After the transfer, the government is now back within the WMA limit of Rs 20,000 crore.
Reserve Bank of India will resume issuing longer-term government securities next week under the market stabilisation scheme, along with the weekly auction of treasury bills.
The government on Monday said the financial system has a surplus liquidity of about Rs 1,00,000 crore (Rs 1 trillion) in the system due to huge foreign exchange flows.
Market breadth turned negative with 1,779 declines over 884 advances on the BSE
When banks deposit their money with RBI, the central bank offers government securities of equal value. But now, it could be running out of enough securities to offer banks against the overnight deposits.
Finance Minister Arun Jaitley presented the Budget today.
MSS bonds are issued with the objective of providing the central bank with a stock of securities with which it can intervene in the market for managing liquidity. These securities are not issued to meet the government's expenditure.
RBI's liquidity tightening stance had stumped the Street as a result of which bond yields had risen.
Wednesday's hawkish and essentially courageous decision underscores that Governor Urjit Patel will largely represent continuity, rather than a break, with the policies and approach of his predecessor, says Richard Iley.
Depreciating the rupee against the dollar to boost economic growth has fiscal constraints and monetary limitations
RBI said the outlook for economic growth for 2016-17 has turned uncertain after the unexpected loss of momentum by 50 basis points in Q2 and the effects of the withdrawal of banned notes
Bank of America Merrill Lynch on Monday trimmed India's economic growth estimates by 30 basis points to 7.1 per cent for the current fiscal, while global financial services giant Morgan Stanley downgraded its GDP growth forecast for the current fiscal to 7.3 per cent from the earlier 7.7 per cent.
The bigger worry is that its effects could linger well into the next financial year.
Well then, what did DeMo achieve? As predicted by most economists, the volume of transactions fell, economic activity was adversely impacted, and some sectors (which were more dependent on cash transactions) witnessed greater disruption than others, says Rahul Khullar.
The best possible move would be for the government to spend the funds on activities like infrastructure development or as it deems fit, says Soumya Kanti Ghosh.
'Fear is also a great impetus to push people in the right direction.' 'So, everyone who has touched black money is scared and I'm very happy about it.'
RBI on Monday conducted an unprecedented level of liquidity infusion to the tune of Rs 3.3 lakh crore, in which banks bid for as much as Rs 4.5 lakh crore. The central bank said it would conduct a liquidity infusion auction of Rs 1 lakh crore on Tuesday as well, to help banks tide over the liquidity crisis.
Finance Minister Arun Jaitley presented the Union Budget.
I-T lens on current account deposits over Rs 12.5 lakh. All the news and more post demonetisation.
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