Fourth, the RBI as the manager of public debt became the residual subscriber. Fifth, since the Government incurred deficits year after year, the question of the retirement of Treasury bills did not arise. Sixth, the expansionary impact of these deficits, after taking into account the movements in net foreign exchange assets, had to be countered.
Seventh, to counter the impact, open market operations were not possible given the interest rate structure. Eighth, this meant that the cash reserve ratio had to be increased to absorb the excess liquidity.