Mumbai: The Reserve Bank of India's forthcoming monetary policy review should outline steps to curb volatility in systemic liquidity, State Bank of India (SBI) chairperson Arundhati Bhattacharya said on Friday.
The RBI is scheduled to announce this fiscal year's first bi-monthly monetary policy on April 5.
"We expect RBI to address the issues of systemic liquidity," Ms Bhattacharya said in a statement here.
Currently, high volatility in currency holdings of public (both in the form of cash and jewellery) as well as government's cash balances with the RBI is leading to volatility in systemic liquidity, she said.
"To this end, government's cash balances may be placed with public sector banks, instead of with RBI, so that the cash remains within the banking system and does not create unnecessary volatility in money markets," she added.
This step will provide a clear picture of the money available within the system which will not get distorted by government borrowing.
This step would increase government's revenue as the funds can be kept in an interest bearing account with the banks, she stated.
Ms Bhattacharya said the RBI should examine the reasons for increase in currency holdings with public.
The RBI may also alleviate the market participants concern about potential dollar shortages in September/October 2016 related to maturity of special FCNR (B) (foreign currency non-resident banking) swaps, she said.
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