Money & Banking

RBI gets muted response to 12-day variable rate term repo auction

Mumbai | Updated on March 26, 2020

The Reserve Bank of India (RBI), on Thursday, received bids aggregating only ₹11,772 crore against the notified amount of ₹50,000 crore at the 12-day variable rate term repo auction.

The central bank accepted the bids aggregating ₹11,772 crore at the cut-off rate of 5.16 per cent. Earlier in the day, the central bank had doubled the amount of the aforementioned auction to ₹50,000 crore.

The tepid appetite for liquidity is probably an indicator that the banking system is flush with funds and there are not many avenues for deployment in the current slowdown, which has been exacerbated by the Covid-19 pandemic.

Thursday’s auction was originally scheduled on March 30, but the RBI decided to advance it to March 26. The auction was advanced in view of the rapidly evolving financial conditions and taking into account the impact of disruptions caused by Covid-19.

The RBI is conducting these auctions to address any additional demand for liquidity and to provide flexibility to the banking system in year-end liquidity management. As a special case, Standalone Primary Dealers (SPDs) are also allowed to participate in these auctions, along with other eligible participants.

The RBI will be conducting a three-day variable rate term repo auction for ₹25,000 crore on March 31.

Published on March 26, 2020

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