Mumbai: in a move aimed at improvement liquidity in the banking system, the rbi has said that it will conduct a USD/INR BUY/Sell Swap Auction on Feb 28 to Inject Rs 86,000 Crower Crower into the Banking System. The auction, aimed at meeting long-term liquidity needs, will involve a $ 10 billion swap with a three-yar tenor. The first leg of the swap will be settled on March 4, 2025, While The Reverse Leg will be settled on March 6, 2028.
According to money market deals there is a severe shortfall of liquidity in money markets and liquidity infusion of Rs 1.2 Lakh Crore is Needed by March 2025 to Bring Core Liquidity from Deficit to Neutral to Ensure That Policy Rates are effective in the term money money.
RBI has infused funds to counter a sharp liquidity decline caused by aggressive Forex Market Intervention and Other Factors. Despite these efforts, India's Banking System Facted A Liquidity Deficit of Rs 1.7 Lakh Crore as on Feb 20.
RBI has purchased Rs 1.4 Lakh Crore Wort of Bonds Through Market and Secondary Purchases and Infused Rs 44,000 Crore Via A $ 5 Billion Dollar/Rupee Swap. However, the weighted average inter-bank call money rate remains Above RBI's Policy REPO RATE, Despite these infusions.
RBI has alredy infused Rs 1.8 Lakh Crore through Long-Term Repos Maturing in Early April and May Roll Them Over For Another Two Months. Liquidity conditions are expected to improve once rbi pays a dividend to govt by may-end.
Under the swap mechanism, banks will sell us dollars to rbi and agree to repurchase them at the end of the swap period.
6
Leave a Reply