Excess liquidity should be withdrawn: RBI

Major developed economies should quickly withdraw excess liquidity from the banking system to avert another financial crisis,as the flood of cash could lead to imbalances,India’s Reserve Bank of India deputy said on Wednesday.

“As the global economy starts recovery,a calibrated exit from this unprecedented accommodative monetary policy will have to be ensured to avoid recurrence of the financial crisis being experienced now,” deputy governor Rakesh Mohan said.

Advanced economies have loosened their monetary policy substantially since the second half of 2007,he said,in a paper prepared for the Financial Stability Review of Bank of France.