To inject durable liquidity into the banking system, the Reserve Bank of India on Wednesday said it will conduct two tranches of open market operations and a longer duration dollar/rupee buy/sell swap.
The RBI will conduct two OMOs, totalling Rs 1 lakh crore on March 12 and March 18, while also conducting another round of dollar/rupee buy/sell swap worth $10 billion on March 24, the official statement said.
"Detailed instructions for each operation shall be issued separately. 3. The Reserve Bank will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions," the RBI said in the official statement.
Indian banks' liquidity deficit stood at Rs 204.2 billion as on March 4, the lowest level since December 15.
Liquidity conditions have been tight since mid-December largely due to tax outflows, dollar sales by the RBI in the foreign exchange market to stabilise the rupee and lower-than-expected government spending.
Since mid-January, the Reserve Bank of India has infused funds to counter a sharp decline in liquidity caused by its aggressive intervention in the foreign exchange market, among other factors.
The RBI also cut its key interest rate for the first time in nearly five years earlier this month, but market participants say sufficient liquidity is a must to ensure effective policy transmission by lenders.
The central bank has infused over 4.5 trillion rupees into the banking system since the middle of January.
This includes 1.39 trillion rupees of bond purchases, around 1.31 trillion rupees through foreign exchange swaps and 1.83 trillion rupees of early April-maturity repo auctions.
Source Name : Economic Times