The Growth Side

Following its long trail of prioritising inflation control through tight monetary policies, the Reserve Bank of India has finally decided to tilt the scale in favour of growth by ensuring increased liquidity in the market.

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The central bank has announced a major move to inject around USD 21 billion (Rs 1.9 trillion) into the banking system with an aim to ease lending conditions and support economic growth.

This step is necessary as liquidity in the banking sector has remained tight due to tax outflows and lower-than-expected government spending over an extended time frame.

Banks have been facing a liquidity deficit since mid-December, making it harder for them to lend money freely.

Though the deficit narrowed to Rs 204.2 billion by March 4, the strain was still visible.

To address this issue, the RBI has stepped in with measures that should help banks access more funds and pass on lower interest rates to borrowers.

To pump money into the system, the RBI will buy government securities worth Rs 1 trillion in two rounds—Rs 50,000 crore each on March 12 and March 18.