All eyes are on the Reserve Bank of India (RBI) Governor Shaktikanta Das as he will announce the Monetary Policy Committee’s (MPC) decision shortly. Keenly watched will be the RBI’s liquidity balancing act in light of the higher government borrowing.

RBI is likely to suck out the excess liquidity in the system that it had provided in 2020, said Pranjul Bhandari, Chief India Economist at HSBC, on Friday.

“Over the next couple of meetings, the RBI will try to suck out the excess liquidity in the system that it has provided in 2020. It can do it by letting the CRR cut reverse, by doing more variable reverse repo rate auctions and this will also help it create some space for open market operations (OMOs) and support the government’s bond borrowing programme for FY22,” she said while speaking to CNBC-TV18.

However, said Bhandari, I don't expect a change in repo rate this or next year.

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(Edited by : Ajay Vaishnav)