To increase liquidity, the Reserve Bank may reduce the quantum of government securities to be held by banks under the 'held to maturity' (HTM) category, deputy governor HR Khan said .
"We will consider reducing the G-secs under the HTM category to increase liquidity in non-disruptive manner," Khan told a capital markets meet.
Banks' statutory bond holdings (SLR) are classified into various categories like HTM, available for sale and held for trading.
At present the HTM cap is set at 25% but it has been traditionally aligned with a bank's statutory liquidity ratio (SLR), which is the portion of deposits that a bank must invest in government bonds, currently pegged at 23%.
RBI had said in October it was looking into a recommendation from a central bank committee to cut the HTM ceiling.
On prevailing high liquidity deficit, the deputy governor said the government's cash balance is quite high and that is the main reason for the liquidity crunch. But he was quick to add that if the liquidity deficit persists, then RBI will conduct OMOs.
Khan also said the RBI is considering carving out a portion of the SLR for liquidity purposes, although he did not provide further details.
On giving tax incentives to mutual fund instruments, Khan said the tax treatment on debt fund is unequal as compared to equity funds. "So, the government is considering offering tax sops to these kinds of instruments. The proposal is being considered by the government," he said.
On the proposal for consolidating the government bonds market, he said, "We are in discussions with the government, this will happen in the next two to three years. If you do consolidation, it will increase the liquidity.