Comments
With the banking system being awash with liquidity, the Reserve Bank of India (RBI), on Friday, received bids amounting to just 29 per cent of the notified amount of ₹3.80-lakh crore at the 14-day variable rate reverse repo auction. It did not receive any bid for the ₹25,000-crore seven-day variable rate reverse repo auction.
The RBI conducted these two auctions to infuse rupee liquidity to counterbalance possible domestic liquidity effects of the $2-billion sell/buy swap operation, which is aimed at enhancing dollar availability in the forex market and stabilising the rupee vis-a-vis the US dollar.
When it announced the auctions on Friday, the RBI said it was closely and continuously monitoring the rapidly evolving global situation and that it would take all necessary measures to ensure that money, debt and forex markets remain adequately liquid and stable and continue to function normally.
At the 14-day variable rate reverse repo auction, the RBI received bids aggregating ₹1,10,845 crore against the notified amount of ₹3.80-lakh crore at the cut-off rate of 5.14 per cent. The weighted average rate worked out to 5.13 per cent, the RBI said in a statement.
With the rupee weakening beyond 74 to the dollar level, the Reserve Bank of India (RBI), on Thursday, stepped in to arrest further depreciation of the domestic unit, announcing that it will undertake six-month US Dollar sell/buy swaps to provide liquidity to the foreign exchange market. To begin with, it will offer $2 billion on March 16.
Simultaneously, the RBI said it is closely and continuously monitoring the rapidly evolving global situation and spillovers arising from the COVID-19 pandemic.
The sell/buy swap, whereby a bank will buy dollars from the Reserve Bank and simultaneously agree to sell the same amount of greenback at the end of the swap period, will be conducted through the auction route in multiple tranches, the RBI said in a statement.
The auctions will be multiple price-based – successful bids will be accepted at their respective quoted premiums. The swap comes in the backdrop of mismatches in US dollar liquidity becoming accentuated across the world.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.