"The reduction in SLR should be seen in the context of ongoing RBI efforts to ensure adequate liquidity for funding credit needs. This has put near term pressure on Gsec yields, but in the current environment with banks holding excess SLR, the impact of the same would be diluted. The SLR cut could also put more pressure on the government to respond on the fiscal side, in our view. The policy guidance conditions further monetary easing on adequate steps by the government to address the supply side constraints. In this context, the RBI is likely to proactively respond to growth moderation."
Navneet Munot – Chief Investment Officer, SBI MF