RBI announces fresh measures to boost liquidity conditions

Posted By: Religare
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RBI announces fresh measures to boost liquidity conditions
In yet another surprising move after the monetary policy review, the Reserve Bank of India (RBI) on Monday announced fresh measures to ease the liquidity conditions in Asia's third largest economy, partially rolling back the measures taken in month of July to stem rupee's slide.

The central bank eased the short term borrowing costs for banks by slashing the marginal standing facility (MSF) rate by 50 basis points from 9.5 per cent to 9 per cent. In the latest monetary policy review, RBI had reduced the MSF by 75 basis points from 10.25 per cent to 9.5 per cent.

The RBI also said it has decided to provide additional liquidity through term repos of 7-day and 14-day tenor for a notified amount equivalent to 0.25 per cent of net demand and time liabilities (NDTL) of the banking system through variable rate auctions on every Friday beginning October 11, 2013.

The notified amount and tenor of the term repo auctions will be announced prior to the dates of the auctions, said RBI in a statement. On Monday, the RBI also infused Rs 9,974 crore through open market operations (OMOs) to inject liquidity in the system.

Meanwhile, in line with the reduction in MSF rate, the Bank Rate also stands adjusted to 9.0 per cent with immediate effect, said RBI.

Dion Global Solutions Ltd.

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