Money & Banking

RBI moves to provide liquidity to market players

Our Bureau Mumbai | Updated on March 23, 2020

To conduct variable rate term repo auctions, open to standalone primary dealers too

With the financial markets going into a tailspin due to the Covid-19 outbreak, the Reserve Bank of India (RBI) has decided to conduct “fine-tuning” variable rate 16-day term repo auctions of ₹50,000 crore each on March 23 and March 24.

Simultaneously, the central bank also brought forward the ₹30,000-crore open market operation (OMO) purchase auction to March 26 from March 30.

The RBI, in a statement, said: “As a pre-emptive measure to tide over any frictional liquidity requirements on account of dislocations due to Covid-19, the Reserve Bank of India has decided to conduct the following fine-tuning variable rate repo auctions for ₹1 lakh crore.”

As a special case, the RBI said standalone primary dealers will be allowed to participate in the variable rate term repo auctions along with other eligible participants. The RBI provides liquidity to market players via these auctions.

Monitoring markets

The RBI said it is monitoring the evolving financial market conditions. The central bank observed that it will calibrate its operations to meet any need for additional liquidity support, if warranted, to ensure normal functioning of markets, promote staff welfare and preserve financial stability.

Published on March 23, 2020

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