We are constantly watching liquidity: RBI

Mumbai: Reserve Bank is constantly monitoring the liquidity situation in the system and has been buying back Government bonds to ease the tight money supply, one of the Deputy Governors of the apex bank said today.

"We have already done two buybacks of Government securities and are constantly looking at the liquidity situation," Deputy Governor H R Khan, who looks after financial institutions and bond markets at RBI, told reporters on the sidelines of an international banking expo here.

To ease tight liquidity situation in the system, which is said to be at around Rs 1.2 trillion – which is a tad over double the comfortable 1 per cent liquidity deficit that RBI has been maintaining for the past many months to tame inflation – it offered to buy back Government bonds worth Rs 20,000 crore in the past seven days.

For instance, RBI bought back Gilts worth Rs 5,783 crore through open market operations on Thursday against an offer of Rs 10,000-crore buyback and despite an offer worth over Rs 13,000 crore from the markets. Late last week too, it had bought Gilts worth Rs 9,435.5 crore this route.

On the Finance Ministry`s directive to state-run banks to install white-label ATMs and the reported differences RBI has on this, Khan said the regulator is looking at the viability of this model as it involves security issues.

"We are looking at all the issues regarding the white- label ATMs, including cash management. We are specifically looking at the service bank or lead bank concept, which will be in charge of the shared ATMs," he said.

Asked about the ability of banks to meet the financial inclusion deadline of March 2012, Khan said the banks are on course to meet the objective.

Under the white-label ATM concept, no bank will be owning the cash vending machines and the entire work is outsourced. The move is aimed at reducing the cost on individual banks as also to increase penetration.

This directive is part of Government decision to make the state-run banks to source all their software and hardware from the same vendor.