RBI may soon change the way of liquidity management, know what can be the big changes..

The Reserve Bank of India (RBI) is preparing for a major change in its liquidity management framework. According to information received by Zee Business from sources, the RBI may review this system in the next few days. The bank wants to make liquidity, i.e., the supply of cash in the market, more flexible and market-friendly.

So far, the RBI conducts variable rate repo (VRR) and reverse repo (VRRR) operations with a duration of 14 days. But according to the new proposal, it can be made in 7 days. This will make liquidity operations faster. RBI will be able to respond immediately in case of a sudden cash shortage or excess supply in the market. However, this may affect those whose home loan or car loan is based on a floating rate. In such a situation, fluctuations in EMI may increase.

NDTL can be made a new measure of liquidity

RBI is considering that the liquidity needs of banks should be fixed in proportion to their total deposits, i.e., Net Demand and Time Liabilities (NDTL). This will enable the distribution of liquidity in a more accurate and balanced manner. Competition for lending among big banks may increase, and there may be some increase in fixed deposit and loan rates in small banks.

Fixed-rate operations may come again if needed.

Sources say that if a situation like a sudden cash crisis or instability arises in the market, then the RBI can start fixed-rate operations again. That is, banks will be given liquidity at a fixed rate. This can maintain stability in the market.

'Call money rate' can remain the main indicator.

According to the current policy of the RBI, the interbank loan i.e. call money rate is considered the main indicator. It is likely to be kept as the main operating target in future also. This makes it easier to understand the policy rates and maintains stability in interest rates.