Reserve Bank of India takes auction route to manage liquidity
Published March 3rd, 2007
The central bank, which is checking gains in Rupee in forex market by supplying it aginst Dollar, altered measures to sterilise the Rupee in the domestic market.
It has now put a ceiling of Rs 30 billion on the amount absorbed under its reverse-repo facility by banks on daily basis.
In a press note issued Friday, RBI has specified that daily reverse repo absorptions would be limited to a maximum of Rs 30 billion each day, comprising Rs 20 billion in the first Liquidity Adjustment Facility (LAF) auction and balance in the second auction. In case of partial rejection of bids, allocations would normally be made proportionately on a pro-rata basis.
In this week, banks has parked a total of a bulk of Rs 1,188.2 billion with RBI at a fixed rate of 6%.
It has also decided to use MSS (Market Stabilisation Scheme) to manage the liquidity condition in the banking system. Under the modified MSS, the RBI on every Friday, will announce the possibility and the quantum of MSS issuances for the succeeding week.
For the coming week (ending Mar. 9), MSS auctions have been scheduled to absorb Rs 85 billion. On March 6, Tuesday, there will be an auction of dated security `6.65% Government stock 2009` for a notified amount of Rs 60 billion; and on following day, there will be T-bill auctions of Rs 25 billion. Till date, MSS operated with an annual ceiling for 2006-07 being at Rs 700 billion. Under the MSS, a sum of Rs 164.57 billion has been sterilised so far in the current year and the outstandings are at Rs 454.57 billion.
Share This Article by Email or Social Web
Related Articles
