Business Today
Loading...

Coronavirus scare: RBI announces OMOs purchase of Rs 1 lakh crore to boost liquidity

The RBI has decided to conduct the variable rate repo auctions to tide over any frictional liquidity requirements on account of dislocations due to COVID-19

Chitranjan Kumar   New Delhi     Last Updated: March 23, 2020  | 15:53 IST
Coronavirus scare: RBI announces OMOs purchase of Rs 1 lakh crore to boost liquidity
The RBI will auction 16-day variable rate repo auctions for Rs 50,000 crore each on March 23 and March 24

In a bid to maintain stability in the financial system in the wake of coronavirus outbreak, the Reserve Bank of India on Monday announced massive OMOs (open market operations) purchase of government securities. The central bank will conduct variable rate repo auctions for Rs 1,00,000 crore in two tranches. This move will enable the RBI to have better control on the liquidity situation in the economy.

"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 Rs 1,00,000 crores in two tranches," the apex bank notified on Monday.

The central bank will auction 16-day variable rate repo auctions for Rs 50,000 crore each on March 23 and March 24, respectively. The date of reversal for the auction is April 8 and April 9, respectively.

"As a special case, standalone primary dealers will be allowed to participate in these auctions along with other eligible participants, the RBI said.

All other terms and conditions as applicable to term repo auctions will remain the same, it added.

Also Read: Coronavirus outbreak: How RBI set up war-room in just one day

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

Commenting on the RBI announcements, Rahul Gupta, Emkay Global Financial Services, said, "Instead of a repo rate cut, RBI is taking these unconventional measures or alternative mechanism to infuse liquidity in the system to support the economy in the effect of coronavirus spread.  A Rate cut of at least 50bps still remains on cards, which can take place during the RBI policy on April 3."

Considering the liquidity situation in the market, the RBI has also announced to advance the second tranche of purchase of government securities under open market operations (OMOs) for Rs 15,000 crores to March 26, 2020 (originally scheduled to be conducted on March 30, 2020).

Also Read: Rupee vs Dollar: Rupee falls to all-time low of 76.15 on coronavirus scare

Last week, the apex bank had announced its intent to purchase government securities under OMOs for an aggregate amount of Rs 30,000 crores in the month of March. The first tranche was scheduled to be conducted on March 24, 2020 and the second tranche on March 30, 2020.

The move came after Indian rupee today fell sharply against the US dollar, slipping below the 76 per dollar mark for the first time. The rupee tumbled to a record low of 76.16 against US dollar, against previous close of 75.19, tracking weakness in the equity market, which plunged over 10 per cent on Monday amidst concerns over rising number of coronavirus cases in the country.

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close