The Reserve Bank of India (RBI) announced on Tuesday that it plans to extend the amount of liquidity infusion to Rs.50,000 crore from Rs.40,000 crore for the month of December 2018.
Earlier, the RBI had announced that it would inject capital equal to Rs.40,000 crore into the system through Open Market Operations (OMOs) by way of making purchases of government securities. So far, the central bank had injected Rs.20,000 crore with the help of two auctions. However, due to the widening liquidity deficit, the bank decided to inject Rs.10,000 crore more. Therefore, Rs.15,000 crore will be injected into each of the next two auctions.
In the release that the RBI announced about the additional liquidity infusion, the central bank also made it known that it will conduct an auction for buying government securities for Rs.15,000 crore on December 20.
RBI has planned to infuse capital in the month of January 2019 too. The bank will conduct five OMO auctions of Rs.10,000 crore each. The liquidity in the system will be closely monitored and more capital will be injected if need be.
The central bank of the country will consider a similar amount of OMO purchases, like that planned for the month of January, for the rest of the fiscal year. The quantum, however, will be decided based on the situation of the currency that is in circulation, sterilisation operations carried out for the bank’s forex operations, and other such factors.