RBI Unveils Measures to Infuse Rs 1.50 Lakh Crore into the Banking System.
Banking & Finance
On January 27, 2025, the Reserve Bank of India (RBI) unveiled a set of measures to inject approximately Rs 1.5 lakh crore into the banking system in phases. The primary aim of these actions is to alleviate the liquidity shortage resulting from the RBI's intervention in selling dollars to stabilize the Indian Rupee (INR).
- The RBI will buy Government Securities (G-secs) worth Rs 60,000 crore through Open Market Operations (OMO) in three tranches of Rs 20,000 crore each, with auctions scheduled for January 30, February 13, and February 20, 2025.
- The RBI has announced a 56-day Variable Rate Repo (VRR) auction for Rs 50,000 crore, scheduled for February 7, 2025, to meet the liquidity requirements of banks until March 31, 2025.
- RBI has announced a USD/INR Buy/Sell Swap auction of USD 5 billion for a 6-month tenor, scheduled for January 31, 2025, to manage liquidity conditions. Under this arrangement, RBI will borrow dollars in exchange for rupees, with the interest cost determined by the repurchase price of the dollars at the end of the tenure.
Main Point :- (i) VRR (Variable Rate Repo) and OMO (Open Market Operations) are tools used by RBI to manage liquidity. VRR helps banks borrow at market-determined rates, while OMO involves the buying and selling of government securities.
(ii) As of January 24, 2025, the banking system faced a liquidity deficit of Rs 2.82 lakh crore, prompting RBI's intervention.
(iii) The RBI recently conducted a VRR auction worth Rs 50,000 crore on January 16, 2025, and will conduct a USD/INR Buy/Sell Swap auction on January 31, 2025.
About RBI
Governor : Sanjay Malhotra
Headquarter : Mumbai
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