RBI to pump 1.5L cr to markets by March

The Reserve Bank of India is expected to pump in Rs 1.5 lakh crore in the markets by March 2019, according to a research report by Bank of America-Merrill Lynch (BofAML).

"Our liquidity model suggests that it should step up to Rs 50,000 crore a month in the March quarter pushing G-secs into excess demand," BofAML said in research note.

At the presser post the RBI Monetary Policy Committee meeting, RBI Deputy Governor, Viral Acharya had assured the support to markets on liquidity front. The markets are reeling under a terrible liquidity crunch after the default by IL&FS.

The Reserve Bank has injected liquidity amounting to Rs 36,000 crore in October and Rs 50,000 crore in November through open market purchase operations, taking total liquidity injection to Rs 1.36 lakh crore for 2018-19. Liquidity injected under the Liquidity Adjustment Facility (LAF), on an average daily net basis, was Rs 56,000 crore in October, Rs 80,600 crore in November and Rs 10,500 crore in December

According to the report by BofAML, there is a high chance of RBI going for a rate cut of 25 basis points in the February MPC meet, as it thinks that the high real rates have been hurting India's growth.

Even as the apex bank retained the 'calibrated tightening' stance in a 5:1 vote and kept rates unchanged unanimously, Governor Urjit Patel said that room for commensurate policy action opens up if risks to their inflation forecast do not materialise in the post-policy conference call.

The country saw the GDP growth dip to 7.1% in the September quarter.

The RBI has also cut its 2HFY19 inflation forecast yet again to 2.7-3.2% from 3.9-4.5% earlier. Finally, the RBI has expectedly indicated a preference for injecting liquidity through OMO rather than a CRR cut.