RBI to inject liquidity into banking system

Mumbai: On a review of current liquidity and financial conditions, Reserve Bank of India has decided to conduct certain operations to inject liquidity into the banking system.

They include 90-day Variable Rate Repo (VRR) operation for an amount of`25,000 crore to be conducted on January 30.

It will be followed by USD/INR Buy/Sell Swap auction of USD 10 billion for a tenor of 3 years to be held on February 04.

OMO purchase auctions of Government of India securities for an aggregate amount of`1,00,000 crore in two tranches of`50,000 crore each will be held on February 05 and 12.

Detailed instructions for each operation shall be issued separately, RBI said in a statement.

The Reserve Bank will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions, it added.

Talking to Bizz Buzz, MV Hariharan, former treasury head, SBI, says, “This is a much anticipated as well as expected move by the Central Bank.”

At a juncture when the global headwinds are getting more volatile and insular too, domestic markets needed a strong indication and message of effective support. The INR too is being buffeted by the prevailing Uncertainties and daily evolving new normals. Given the existing macros, the downward pressures being exerted on it warranted temperance and these steps by RBI are aligned with the same.

The sustainability of such measures depend on agile and measured internal responses for which proactive tweaks are imperative. The upcoming Budget can be a strong tailwind too, he said.