RBI steps up measures to ease cash-crunch

MUMBAI: The Reserve Bank of India has stepped up measures to ease cash-crunch in the system ahead of advance tax payments, which lead fund outflows deepening the crisis.

The central bank on Friday announced to conduct an open market operation to purchase government bonds worth Rs 15,000 crore. A day earlier, it did the same but for Rs 12,000 crore. The auction will take place on March 10.

“Ahead of advance tax outflows this OMO purchase will ease liquidity in the system while relaxing pressure on bond yields,” said Piyush Wadhwa, head of trading, financial markets group, at IDFC Bank. “Yields would now stabilise in the range 7.55-7.70%.”

RBI will purchase six sovereign papers maturing between next two and 14 years. Long term maturity papers should impact bond yields positively pushing prices up.

Based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct purchase of Government securities under Open Market Operations….,” RBI said in a release.