RBI’s two-way operations to manage funds to sort out liquidity stress
A cut in cash reserve ratio (CRR) by 50 bps to 4%, effective from December 14 in two phases, will infuse Rs 1.16 lakh crore into the banking system.
By ET Bureau |
Reuters
A cut in cash reserve ratio (CRR) by 50 bps to 4%, effective from December 14 in two phases, will infuse Rs 1.16 lakh crore into the banking system.
The Reserve Bank of India (RBI) has been conducting two-way operations to infuse or absorb liquidity into the banking system. Since October, the RBI received more than double the bids when the central bank used tools to infuse liquidity, signifying an urgent demand for funds. The RBI accepted 95% of the total notified amount while injecting funds. While absorbing funds, bids received were less than half of the total notified amount, which pointed to liquidity stress in the banking system. The central bank had to accept only 41% of the total notified amount because of muted bidding during auctions. A cut in cash reserve ratio (CRR) by 50 bps to 4%, effective from December 14 in two phases, will infuse Rs 1.16 lakh crore into the banking system.
