RBI measures improve liquidity repo rate details Reserve Bank of India

  • by THO
  • 1 year ago
  • news
  • 1
Image Source : FILE PHOTO Reserve Bank of India introduces a host of steps to improve liquidity.

The Reserve Bank of India (RBI) in order to improve liquidity announced a host of steps, including term repo operations totalling Rs 1 lakh crore in mid-September to ease pressure on the liquidity and maintain congenial financial conditions with a view to ensuring sustainable recovery of economic growth.

“The RBI stands ready to conduct market operations as required through a variety of instruments so as to ensure orderly market functioning,” the central bank said in a statement adding that recently market sentiment has been impacted by concerns relating to the inflation outlook and the fiscal situation amidst global developments that have firmed up yields abroad.

RBI to conduct repo operations for aggregate amount of Rs 1,00,000 crore

As part of the measures to ‘foster orderly market conditions’, the RBI will conduct term repo operations for an aggregate amount of Rs 1,00,000 crore at floating rates (at the prevailing repo rate) in the middle of September to assuage pressures on the market on account of advance tax outflows.

The RBI said that in order to reduce the cost of funds, banks that had availed of funds under long-term repo operations (LTROs) may exercise an option of reversing these transactions before maturity.

“Thus, the banks may reduce their interest liability by returning funds taken at the repo rate prevailing at that time (5.15 per cent) and availing funds at the current repo rate of 4 per cent. Details are being notified separately,” it said.

Last date of paying advance tax Sep 15

The last date for paying the second instalment of advance tax is September 15.

Further, the RBI will conduct additional special open market operation involving the simultaneous purchase and sale of government securities for an aggregate amount of Rs 20,000 crore in two tranches of Rs 10,000 crore each. The auctions would be conducted on September 10, 2020, and September 17, 2020.

The RBI remains committed to conducting further such operations as warranted by market conditions, the central bank said.

As part of the measures, the RBI has also decided to allow banks to hold fresh acquisitions of statutory liquidity ratio (SLR) securities acquired from September 1, 2020, under Held-To-Maturity (HTM) up to an overall limit of 22 per cent of net demand and time liabilities (NDTL) up to March 31, 2021 which shall be reviewed thereafter, it said.

Currently, banks are required to maintain 18 per cent of their reserves in SLR securities. The extant limit for investments that can be held in HTM category is 25 per cent of total investment.

Banks are allowed to exceed this limit provided the excess is invested in SLR securities within an overall limit of 19.5 per cent of NDTL. SLR securities held in HTM category by major banks amount to around 17.3 per cent of NDTL at present.

The RBI further said it remains committed to using all instruments at its command to revive the economy by maintaining congenial financial conditions, mitigate the impact of COVID-19 and restore the economy to a path of sustainable growth while preserving macroeconomic and financial stability.

(With inputs from PTI)

ALSO READReliance-Future Group Deal: RIL shares jump nearly 3 per cent; Future Group stocks rally too

ALSO READAdani Group to acquire 74 per cent stake in Mumbai airport

Latest Business News

Fight against Coronavirus: Full coverage

Source by [author_name]

Compare listings

Compare
%d bloggers like this: