RBI lines up a big liquidity push amid rupee’s slideshow

The RBI will conduct an open market operation (OMO) purchase of ₹1 lakh crore in two tranches of ₹50,000 crore each, on February 5 and February 12.

Further, the RBI will also conduct a three-year dollar-rupee buy-sell swap of $10 billion on February 4 and a 90-day variable rate repo operation of ₹25,000 crore on January 30. The $10-billion swap would infuse nearly ₹92,000 crore into the banking system. The monetary policy committee (MPC) is due to announce the outcome of its latest policy review on February 6.

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market wants more The three measures, ₹1 lakh crore of OMOs, a $10-billion forex swap and a ₹25,000-crore repo, aim to create a durable surplus and drive transmission of rates

“They (the RBI) will have to continue to do OMOs over the next few months. We had expected ₹2 lakh crore of OMOs in February and March, and we expect more measures of ₹5 lakh crore next fiscal year,” said Gaura Sen Gupta, chief economist, IDFC First Bank.

System liquidity stood at a daily average surplus of ₹57,120 crore in January so far and at ₹72,549 crore in December. As a percentage of NDTL (net demand and time liabilities), liquidity is at 0.2% in January and was at 0.3% in December.

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The latest liquidity measures come after the RBI conducted OMO purchases of ₹3 lakh crore and a USD-INR buy-sell swap of $15 billion in December and January. Market participants expect more liquidity measures in this fiscal year and the next.

“With these latest liquidity measures, liquidity will be at around 0.9% of NDTL, assuming there isn’t much leakage from liquidity via FX market interventions,” Gupta said. ET reported in its January 23 edition that banks have sought additional liquidity support from the central bank.