The Reserve Bank of India (RBI) is planning to inject Rs.12,000 crore into the system on November 1 to meet the country’s liquidity needs ahead of the Diwali season. The government will inject these funds through the purchase of government securities. This is a part of RBI’s liquidity exercise to meet the funding requirements that may arise during the festive season.
A week ago, RBI revealed that it is planning to inject Rs.40,000 crore into the system through the purchase of government securities to meet the liquidity demands of the country during the festive season.
In its statement released with regard to the purchase, RBI stated that it is planning to conduct the purchase in the open market on November 1, 2018. It attributed the purchase decision to the country’s prevailing liquidity conditions and future liquidity needs.
The sale of government securities will be conducted through an auction. Participants who are qualified to take part in the auction can submit their offers through RBI’s Core Banking Solution (E-Kuber) system. Once the offers are submitted, the results of the offer will be revealed on the same day. Successful participants can receive their payments from RBI on the same day.
RBI had earlier predicted that the system liquidity will move into deficit by the second half of the current fiscal year. In this scenario, the choice of instruments for liquidity management would be determined based on evolving liquidity conditions.
On October 10, RBI announced a similar injection of funds worth Rs.12,000 crore into the system through the purchase of government securities. This was also done to ease the liquidity crunch in the country and prepare the market ahead of the festive season.
Source: Economic Times