RBI to conduct 28-day special term repo auction for Rs20,000 crore on Friday

news
05 June 2014

The Reserve Bank of India will conduct a special 28-day term repo variable rate auction for a notified amount of Rs20,000 crore on Friday, as announced in the second bi-monthly monetary policy statement issued on Wednesday.

The auction will be conducted as per the revised guidelines issued on 13 February 2014. Successful bidders will get the allotment at their respective bids. The reversal of the 28-day term repo will take place on Friday, 4 July 2014, RBI said.

In its monetary policy announcement on Wednesday, the Reserve Bank had proposed to introduce a special term repo facility equivalent to 0.25 per cent of commercial banks' net demand and time deposits (NDTL) to compensate fully for the reduction in access to liquidity under the extended credit requirements with immediate effect while continuing to provide liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system.

The reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent, RBI stated.

With the unwinding of year-end window dressing, the corresponding decline in the size of excess CRR holding of banks as well as the sharp decline in government cash balances with the Reserve Bank as a result of government expenditure, liquidity conditions improved significantly in April and May 2014, according to the central bank.

RBI said the average daily access to liquidity from the LAF and term repos during this period has been close to 1.0 per cent of NDTL, adding that it would continue to monitor liquidity conditions and actively manage liquidity to ensure adequate flow of credit to the productive sectors.





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