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October 22, 2001
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CRR cuts not to trigger open market operations: RBI

CREDIT
POLICY
The Reserve Bank of India is not currently planning large scale open market operations to mop up liquidity released by large cuts in banks' cash reserve ratio announced on Monday, its top official said.

"Excessive open market operations...we don't think are necessary unless bond markets are in a highly uncertain mode," RBI Governor Bimal Jalan told reporters.

"There is a liquidity adjustment facility which is working, and therefore the liquidity overhang problem is also not there any more," he said, in reply to a question on the impact of the CRR cuts.

Earlier, the bank surprised markets by announcing a cut in banks' CRR to 5.5 per cent from 7.5 per cent in two stages. The first cut will take effect on November 3, taking CRR to 5.75 per cent and the second on December 29.

The central bank said its policy measures would release a total of Rs 80 billion to banks.

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