This Article is From Aug 31, 2020

RBI Announces More Liquidity Operations Worth Rs 20,000 Crore

RBI has also announced the infusion of Rs 1 lakh crore in mid-September through long-term repo operations (LTROs) at floating rates

RBI Announces More Liquidity Operations Worth Rs 20,000 Crore

RBI has now announced two separate set of liquidity operations in as many weeks

The Reserve Bank of India (RBI) on Monday said that it will conduct liquidity operations worth Rs 20,000 crore in two tranches through sale and purchase of government securities (G-Secs). The two open market operations (OMOs) of Rs 10,000 crore each will be conducted on September 10 and 17, the central bank said in an official release. This is now the second such announcement in as many weeks. Last week, RBI had announced sale and purchase of G-Secs worth Rs 20,000 crore, in two tranches, slated to be conducted on August 27 and September 3.

In another move, RBI announced the infusion of Rs 1 lakh crore in mid-September through long-term repo operations (LTROs) at floating rates, or the prevailing repo rate. Moreover, the central bank also gave an option to lenders who have earlier availed funds through LTROs, to reverse their transactions before maturity.

"The banks may reduce their interest liability by returning funds taken at the repo rate prevailing at that time (5.15 per cent) and availing funds at the current repo rate of 4 per cent," the RBI release said.

OMOs enable a central bank to adjust liquidity - or supply of money - in the banking system. Central banks do so by way of trading government bonds with commercial banks.
 

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