RBI to inject Rs 1 lakh cr cash into banking system in March

RBI to inject Rs 1 lakh cr cash into banking system in March

The Reserve Bank of India will inject Rs 1 lakh crore short term money into the banking system ahead of the financial year-end that normally sees cash crunch. The move is likely to keep short term rates under check benefiting borrowing companies.

“In order to address additional demand for liquidity and with a view to provide flexibility to the banking system in its liquidity management towards March-end, it is prepared to inject adequate additional liquidity….,” RBI said in a release. The central bank will use a combination of appropriate instruments for such fund infusion, while continuing with its normal liquidity adjustment facility (LAF) operations.

Beginning Tuesday RBI will conduct four variable repo operations of Rs 25,000 crore each. After reviewing the current and evolving liquidity conditions in the banking system it has been decided to conduct additional variable rate repo operations for longer tenors to provide additional liquidity support to the banks during March 2018, RBI said. This should bring short term rates including Treasury bills, call money.

“The proposed injection of additional liquidity aggregating to Rs 1 lakh crore by the RBI using longer term Repo that extends beyond March 31, 2018 should help cap the short-term rates,” rating company ICRA said. Also, it aids in lowering the rate volatilities for the rest of the month, it said.

The Economic Times, New Delhi, 06th March 2018

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