Indian Central Bank Announces Measures To Boost Banking System Liquidity

RTTNews | 198 dias atrás

(RTTNews) - The Reserve Bank of India on Monday announced several measures that are set to inject over INR 1 trillion liquidity into the banking system, a move many observers interpreted as paving the way for policy easing next week.

The central bank said it will purchase government securities worth INR 600 billion through open market operations purchase auctions. These will be held in three tranches of INR 200 billion each on January 30, February 13 and February 20.

The bank also revealed a 56-day variable rate repo auction for INR 500 billion to be held on February 7.

The RBI also announced USD/INR Buy/Sell swap auction of USD 5 billion for a tenor of six months. This will be held on January 31.

These measures combined are set to infuse INR 1.5 trillion liquidity into the banking system.

The bank said it will "continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions."

Indian banking system liquidity deficit has been over INR 3 trillion in the past few days, local media reports said. The liquidity boost announcement comes days ahead of the RBI interest rate decision on February 7. Many economists saw the latest measures as a prelude to a rate cut next week following the first policy session to be chaired by new RBI Governor Sanjay Malhotra.

The repo rate has been at 6.50 percent since February 2023.

In December, the RBI lowered the cash reserve ratio for all banks by 50 basis points to 4.0 percent, which was the first reduction since March 2020. The move pumped in INR 1.16 trillion into the banking system.

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