MONEY
RBI set to introduce many measures to inject liquidity in the banking system
- IBJ Bureau
- Jan 28, 2025
The Reserve Bank of India (RBI) announced on Monday a host of measures to inject liquidity into the banking system, including bond purchases and dollar-rupee swaps, which analysts and traders said could be a precursor to a rate cut next month.
The RBI’s measures, expected to collectively infuse Rs 1.5 lakh crore into the banking system, come after months of a cash crunch in the banking system that had pushed up overnight and short-term lending rates.
“The urgency that was being felt in the market has been addressed by the RBI through these steps,” said A Prasanna, the head of research at ICICI Securities Primary Dealership.
“I think a rate cut would be the next logical action,” Mr Prasanna said, adding that the announcements signal that the central bank is more confident about inflation management.
The RBI's rate-setting panel will announce its policy review on February 7, after the annual Union Budget on February 1.
As a part of the package, the RBI will buy government bonds worth Rs 60,000 crore in three tranches and conduct a 56-day variable rate repo auction worth Rs 50,000 crore on February 7, it said.
It will also conduct a dollar-rupee buy-sell swap auction of $5 billion for tenure of six months on January 31.
The RBI “will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions,” the RBI has said.
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