No Rate Cut, RBI Announces Some Liquidity Measures

After the US Fed made the emergency rate cut to near-zero level and also announced quantitative easing worth 700 billion for ensuring liquidity in the system to combat recession fears, the RBI in its press conference today did not resort to rate cut as was otherwise expected.

No Rate Cut,RBI Announces Some Liquidity Measures

Also on the sidelines of the conference, the governor says that RBI has several instruments at its command and it stands ready to act to fight COVID 19 impact on the Indian economy.

Earlier, foreign brokerages also held the view that even before the next scheduled MPC meet in April, India's central bank may go in for a rate cut of as much as 75 bps given the benign inflation rate too fast track the economy.

Other Measures Announced To Boost Sentiment

1. RBI to conduct Dollar Buy/Sell Swap On March 23:

Today, it announced another dollar buy/ sell swap on March 23. Earlier amid huge FII outflow from G-securities announced that it will conduct Rs. 25000 crore, 7-day variable rate auction and Rs. 3.8 lakh crore, 14-day variable rate reverse repo auction today. And the variable rate will help counterbalance FX sell/buy swap effect.

2. RBI to conduct multiple LTRO of Rs. 1 lakh crore at policy rate:

In multiple tranches, the RBI will conduct long term repo rate operation to ensure liquidity into the system.

3. Announcement on Yes Bank:

RBI and the government have coordinated and come with the reconstruction plan for Yes Bank very swiftly. The new board for Yes Bank will take over as the Moratorium on the bank will be lifted. And the administrator for the Yes Bank will cease to exist on March 26.
It is a public-private partnership, the first of its kind, to revive the beleaguered Yes Bank. Further, the governor calls the reconstruction scheme for Yes Bank as sustainable, robust and credible.

Also, the governor says the deposits of the account holders with Yes Bank is safe and there is no need for panic withdrawal.

The bank is said to have enough liquidity and if there arises any liquidity, the RBI will support the private sector lender.

4. RBI also supports the use of digital channels amid Covid 19

The RBI governor also supports social distancing and other measures to avoid the spread of the virus.

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