RBI broadcasts steps to ease stress on liquidity

Mumbai, August 31

The Reserve Bank on Monday introduced a bunch of steps, together with time period repo operations totalling Rs 1 lakh crore in mid-September, to ease stress on the liquidity and keep congenial monetary situations with a view to making sure sustainable restoration of financial development.

“The RBI stands ready to conduct market operations as required through a variety of instruments so as to ensure orderly market functioning,” the central financial institution mentioned in an announcement including that just lately market sentiment has been impacted by issues regarding the inflation outlook and the fiscal scenario amidst world developments which have firmed up yields overseas.

As a part of the measures to ‘foster orderly market conditions’, the RBI will conduct time period repo operations for an combination quantity of Rs 1,00,000 crore at floating charges (on the prevailing repo charge) in the course of September to assuage pressures available on the market on account of advance tax outflows.

The RBI mentioned with a purpose to cut back the price of funds, banks that had availed of funds below long-term repo operations (LTROs) could train an choice of reversing these transactions earlier than 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 mentioned.

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

Further, the RBI will conduct further particular open market operation involving the simultaneous buy and sale of presidency securities for an combination quantity of Rs 20,000 crore in two tranches of Rs 10,000 crore every. The auctions can be performed on September 10, 2020, and September 17, 2020.

The RBI stays dedicated to conducting additional such operations as warranted by market situations, the central financial institution mentioned.

As a part of the measures, the RBI has additionally determined to permit banks to carry contemporary acquisitions of statutory liquidity ratio (SLR) securities acquired from September 1, 2020, below Held-To-Maturity (HTM) as much as an total restrict of 22 per cent of web demand and time liabilities (NDTL) as much as March 31, 2021 which shall be reviewed thereafter, it mentioned.

Currently, banks are required to take care of 18 per cent of their reserves in SLR securities. The extant restrict for investments that may be held in HTM class is 25 per cent of complete funding.

Banks are allowed to exceed this restrict offered the surplus is invested in SLR securities inside an total restrict of 19.5 per cent of NDTL. SLR securities held in HTM class by main banks quantity to round 17.three per cent of NDTL at current.

The RBI additional mentioned it stays dedicated to utilizing all devices at its command to revive the financial system by sustaining congenial monetary situations, mitigate the influence of COVID-19 and restore the financial system to a path of sustainable development whereas preserving macroeconomic and monetary stability. — PTI

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