Gokarn Says Indian Liquidity Levels Are Within ’Comfort Zone’

Subir Gokarn, the deputy governor of the Reserve Bank of India, comments on liquidity in the banking system and the nation’s foreign-exchange reserves. He was speaking to reporters in New Delhi today.

On liquidity:

“For the last several weeks, liquidity levels have been in our comfort zone. If signs of stress emerge, particularly if they are likely to be persistent, then we’ll take that into account. We have not, for quite some time, felt that there was stress in the market, both in terms of quantity of borrowing under the liquidity adjustment facility and behavior of call rate.”

On foreign reserves:

“I think the dollar reserve is a strategic resource and it is something we have to measure against potential short-term liability. We have never been uncomfortable with the level of reserves we have had.

“Intervention had been one component of our approach to the exchange rate. Others have been in terms of some administrative actions which we took in November and December. We have rolled back some of those because we felt they were adding some stress to the market.

“Over the last several weeks the currency has been relatively stable and that would suggest that there is a rough balance between inflows and outflows. We are monitoring the situation and will react to it as appropriate.”

To contact the reporter on this story: Tushar Dhara in New Delhi at tdhara1@bloomberg.net.

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net.

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