RBI steps in to address liquidity deficit

The Reserve Bank of India (RBI) said on Wednesday it would be buying Rs 10,000 crore worth of bonds from the secondary market under its open market operations (OMO) programme. This is apart from infusing liquidity through Rs 25,000 crore of repo auctions, to ease liquidity in the banking system Commodity Market Astrology Tips

The repo auction is on Friday and the OMO purchase on Monday, it stated on its website. RBI offered to buy four bond issues through its OMO purchase, maturing between April 2018 and March 2030, with no specified amount. The announcement comes a day after RBI GovernorRaghuram Rajan assured analysts of ensuring comfortable liquidity in the banking system. Which is short of at least Rs 70,000 crore, and even crossed Rs 1 lakh crore recently, when one adds the daily net liquidity injection through the overnight window, dated repo borrowings and borrowings under the marginal standing facility (MSF).

Apart from borrowing Rs 14,762 crore from the daily liquidity adjustment facility window, banks on Tuesday had borrowed Rs 2,070 crore from the emergency MSFwindow and also had to avail Rs 2,314 crore from the refinancing facility Indian stock market astrology prediction

Advance tax outflows would squeeze liquidity further but RBI’s move is likely to cool down bond yields. This is also the first time the central bank would be doing both OMO sales and purchase in the same financial year. In July, RBI had removed Rs 8,270 crore of excess liquidity from the system through OMO sales. The concurrent use of OMO is in sync with the requirement of RBI’s autonomous liquidity and discretionary liquidity framework that aims at maintaining liquidity only as much as required, not more or less, said Soumyajit Niyogi, interest rate strategist at SBI DFHI. Yields on the 10-year bond had frequently touched more than 7.75 per cent, unusual as these should be at a spread of within 100 basis points (bps) of the policy repo rate, now 6.75 per cent. RBI kept policy rates unchanged on Tuesday but said there was room for more cuts if banks passed on the accumulated 125 bps of rate cuts since January, against only about 60 bps done so far. One basis point is a hundredth of a percentage point. Bond yields fell in response and the 10-year bond closed at 7.707 per cent Himanshu Tiwari Astrologer Blog

"As current tight liquidity condition expected to aggravate in coming days, while muted foreign flows necessities more OMO purchase than only term repo. Nonetheless, as a byproduct of OMO purchases, G-Sec yield should get corrected towards monetary policy stance," Niyogi said.