More debt buybacks through open market operations (OMO) in order to address the strain on liquidity.

The RBI didn't go into a monetary easing overdrive in its latest policy review despite slowing growth. However an infusion of liquidity was more than welcome. The Reserve Bank Of India (RBI) recently cut the Cash Reserve Ratio (CRR) by 0.5%. The CRR refers to the share of deposits banks must hold with the central bank. This move is expected to release around Rs 320 bn into the system. But that's not all. The RBI is open to more debt buybacks through open market operations (OMO) in order to address the strain on liquidity. Since late 2011, the central bank has already bought back about Rs 719 bn of government bonds from the secondary market. This was in order to reduce pressure on yields and ease a cash crunch after the government hiked its borrowing plan for FY12. Thus even though policy rates were not cut, increased liquidity is expected to push rates downward. This is definitely good news for growth.