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RBI's Liquidity Push: To Conduct Term Repos Auctions, Advances OMO Purchase
To ease tensions in the markets amid coronavirus scare, the Reserve Bank of India (RBI) in Monday announced measures to continue to supply large amounts of liquidity to the financial system.
The central bank said that as "a pre-emptive measure to tide over any frictional liquidity requirements on account of dislocations due to COVID-19", it has decided to conduct the fine-tuning variable rate Repo auctions for Rs 1 lakh crore in two tranches of Rs 50,000 crore each, on 23 and 24 March.
These will be offered to banks so that they can borrow overnight funds at the repo rate of 5.15 percent against collateral in the form of government securities.
Indian benchmark bonds erased losses after the announcement. The 10-year yield fell to 6.26 percent from 6.31 percent earlier.
RBI said that as a special case, "Standalone Primary Dealers will be allowed to participate in these auctions along with other eligible participants. All other terms and conditions as applicable to term Repo auctions will remain the same."
"The Reserve Bank is monitoring the evolving financial market conditions. The Reserve Bank will calibrate its operations to meet any need for additional liquidity support, if warranted, to ensure normal functioning of markets, promote staff welfare and preserve financial stability," it added.
In a separate press release, RBI said that it has advanced its purchase Government securities under Open Market Operations (OMOs) scheduled for 30 March to 26 March.
"On a review of current liquidity and financial conditions, the Reserve Bank has decided to advance the second tranche of purchase of Government securities under Open Market Operations (OMOs) for ₹ 15,000 crores to March 26, 2020 (originally scheduled to be conducted on March 30, 2020), it said.
