RBI to conduct 28-day special term repo auction for Rs 20,000 cr on Friday

Beena Parmar Mumbai | Updated on March 12, 2018 Published on June 05, 2014

In a bid to provide more liquidity to banks, the RBI said that it will conduct a special 28-day term repo variable rate auction for Rs 20,000 crore on Friday.

The central bank had on June 3 introduced special term repo auction of 28-day tenor for a notified amount (Rs 20,000 crore) up to 0.25 per cent of net demand and time liabilities (NDTL) of the banking system, according to the monetary policy statement.

The 28-day special term repo auction will usually be conducted on non-reporting Fridays. Reversal of the 28-day term repo will take place on Friday, July 4, the central bank added.

Export credit refinance

While announcing the monetary policy on Tuesday, the RBI had reduced the liquidity provided under the ECR facility from 50 per cent of the eligible export credit outstanding to 32 per cent.

Hence, the RBI said that a special term repo facility of 0.25 per cent of NDTL to compensate fully for the reduction in access to liquidity under the export credit refinance (ECR) will be launched with immediate effect.

According to RBI: “This should improve access to liquidity from the Reserve Bank for the system as a whole without the procedural formalities relating to documentary evidence, authorisation and verification associated with ECR. This should also improve the transmission of policy impulses across the interest rate spectrum and engender efficiency in cash/treasury management.”

The reduction was in pursuance of the RBI’s Deputy Governor Urjit R. Patel Committee’s recommendation to move away from sector-specific refinance towards a more generalised provision of system liquidity without preferential access to any particular sector or entity.

Besides, the RBI had reduced the statutory liquidity ratio (SLR), the mandatory amount of bonds lenders must park with the central bank, by 0.5 per cent to 22.5 per cent of their NDTL with effect from June 14.

Published on June 05, 2014
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