Context:
RBI took some steps to Enhance Liquidity in the Banking System.
Major Announcements
- Bond Purchase
- The RBI will purchase central government bonds valued at DC billion in III auctions to inject liquidity into the banking system.
- Variable Rate Repo Auction
- A Variable Rate Repo Auction will be conducted on February VII for D billion to further ease liquidity pressure.
- USDINR Swap Auction
- A buy-sell swap auction of 5 billion with a six-month tenor is scheduled for January 31, to manage forex reserves and stabilize the rupee.
Context: Addressing Liquidity Deficit
- Liquidity Shortfall
- India’s banking system has recently experienced its highest liquidity shortfall in a year, necessitating RBI intervention.
Expected Impact of RBI Measures
- Ease Liquidity Stress
- The bond purchases and repo auctions are designed to inject liquidity, alleviating pressure on the banking system.
- Stabilize Currency
- The USDINR swap auction will help in managing foreign exchange reserves, contributing to rupee stability.
