COVID-19: Markets to Get Rs 30,000 Cr Liquidity From RBI Next Week

The central bank infused Rs 10,000 crore through open market operations on Friday.

2 min read
Reserve Bank of India (RBI). 

The Reserve Bank of India (RBI) will inject liquidity of Rs 30,000 crore through open market operations next week to maintain financial stability in the system in the wake of the coronavirus outbreak.

The RBI has decided to conduct purchase of government securities under open market operations (OMOs) for an aggregate amount of Rs 30,000 crore in two tranches of Rs 15,000 crore each in March, the central bank said in a statement.

The auctions would be conducted on 24 March and 30 March, it said.

It said, “With the COVID-19 related dislocations, stress in certain financial market segments is still severe and financial conditions remain tight. The RBI's endeavour is to ensure that all markets segments function normally with adequate liquidity and turnover.”

The central bank infused Rs 10,000 crore through open market operations on Friday.

It will purchase securities with a coupon rate of 6.84 percent (maturity 19 December 2022); 7.72 percent (25 May 2025); 8.33 percent (9 July 2026) and 7.26 percent (14 January 2029).

The RBI said there is no notified amount against any of these securities within the aggregate ceiling of Rs 15,000 crore set for the operation.

The Reserve Bank reserves the right to decide on the quantum of purchase of individual securities, accept offers for less than or higher than the aggregate amount of Rs 15,000 crore (including due to rounding off) and also to accept or reject any or all the offers either wholly or partially without assigning any reason.

Earlier on Monday, RBI Governor Shaktikanta Das said the regulator has "enough policy tools and stands ready to take any measures" needed to help the economy tide over the impact of the coronavirus pandemic.

In two liquidity-enhancing measures, Das announced another round of USD 2 billion dollar-rupee swap on 23 March, and in another measure, he said the RBI will continue to conduct the long-term repo operations (LTROs) of up to Rs 1 lakh crore as and when the market needs it.

On March 16, the RBI conducted the first dollar-swap for USD 2 billion under which the central bank buys rupee from the market by selling dollars.

On the LTROs, it has already conducted four rounds worth Rs 1 lakh crore operations since 14 February, after announcing it at the 6 February policy review.

OMOs are money market tools to suck or inject liquidity into the system. When there is enough liquidity, the RBI resorts to selling of government securities to take out money supply, while it purchases the same when the market needs the money.

(This story was auto-published from a syndicated feed. No part of the story has been edited by The Quint.)

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