The Reserve Bank would take steps to address the liquidity deficit in the banking system, if required, its Deputy Governor Subir Gokarn said today.
"Liquidity deficit in the banking system is within comfortable levels. RBI will take steps if needed," Gokarn said at a seminar organised at CII-Suresh Neotia Centre of Excellence here.
Gokarn said the RBI generally conducts an open market operation (OMO) to deal with stress in liquidity.
"If we see stresses remaining in the system, then obviously we have the capacity to respond to them," he said.
Talking about Non-Performing Assets (NPA) in the banking system, he said that there were some macro-economic cycles which influenced the pattern of bad assets.
"But NPAs will start to decrease once there is an improvement in business cycles", Gokarn said.
He, however, said the presence of huge NPAs in the Indian banking system would pose a threat to capital adequacy of the banks.
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