RBI Steps In To Inject Rs. 1.5 Lakh Cr To Ensure Liquidity

ENA Economy 2025-01-28 15:49:18 New Delhi, Jan 28 (KNN) The Reserve Bank of India (RBI) unveiled on Monday its largest monetary easing initiative since the pandemic, announcing measures to inject over Rs 1.5 lakh crore into money markets. This significant intervention aims to address the liquidity constraints that emerged from the central bank's efforts to stabilise the rupee through dollar sales. The liquidity shortage developed as RBI reportedly sold more than USD 50 billion from its foreign exchange reserves in response to foreign institutional investors' stock sales. This intervention had consequentially tightened short-term interest rates and elevated borrowing costs across the financial system. The central bank's comprehensive liquidity infusion strategy encompasses three key measures. RBI will conduct a government bond buy-back program worth Rs 60,000 crore, executed in three tranches on January 30, February 13, and February 20, 2025. Additionally, a long-term 56-day variable rate repo auction for Rs 50,000 crore is scheduled for February 7. The third component involves a US dollar-rupee buy/sell swap auction of USD 5 billion with a six-month tenure, where RBI will borrow dollars against rupees with the interest cost determined by the agreed repurchase price. In preparation for the upcoming monetary policy review in early February, RBI Governor Sanjay Malhotra recently convened with private bank leaders. During these discussions, Malhotra emphasised critical priorities including maintaining financial stability, expanding financial inclusion, enhancing digital literacy, and improving access to affordable credit. He also stressed the importance of strengthening customer service and grievance redressal mechanisms. The governor expressed particular concern regarding the increasing instances of digital fraud, urging banks to implement robust preventive systems. His directives included strengthening IT risk management and cybersecurity measures, with specific attention to oversight of third-party service providers. Market analysts interpret these liquidity measures as potentially setting the stage for an upcoming rate cut. They note that tight liquidity conditions typically impede the full transmission of rate cuts to deposits and loans, suggesting that addressing the current liquidity deficit of approximately Rs 3 lakh crore could facilitate more effective transmission of any future rate adjustments. The central bank has affirmed its commitment to closely monitor market conditions and liquidity developments, pledging to implement necessary measures to maintain orderly liquidity management in the financial system. (KNN Bureau) 40811 https://knnindia.co.in/news/newsdetails/economy/rbi-steps-in-to-inject-rs-15-lakh-cr-to-ensure-liquidity 2025-01-28 15:49:18 knnindia.co.in RBI Steps In To Inject Rs. 1.5 Lakh Cr To Ensure Liquidity