The Reserve Bank of India on Friday mentioned it’s going to undertake a secondary market authorities securities acquisition programme or G-SAP 2.0 price Rs 50,000 crore in two tranches this month to allow an orderly evolution of the yield curve.
‘Our latest G-SAP auctions which have focussed on securities throughout the maturity spectrum are supposed to make sure that all segments of the yield curve stay liquid,’ RBI Governor Shaktikanta Das mentioned whereas asserting the third bi-monthly financial coverage.
The Reserve Bank’s secondary market G-sec acquisition programme (G-SAP) has been profitable in anchoring yield expectations whereas eliciting a eager response from market individuals, he famous.
‘We suggest to conduct two extra auctions of Rs 25,000 crore every on August 12 and August 26, 2021, beneath G-SAP 2.0. We will proceed to undertake these auctions and different operations like open market operations (OMOs) and operation twist (OT), amongst others, and calibrate them according to the evolving macroeconomic and monetary situations,’ he mentioned.
Under the revised liquidity administration framework introduced on February 6, 2020, the Reserve Bank has been conducting 14-day variable charge reverse repo (VRRR) auctions as its principal liquidity operation.
With the graduation of regular liquidity operations, the VRRR, which was briefly held in abeyance in the course of the pandemic, has been re-introduced from January 15, 2021, and the preliminary absorption of Rs 2 lakh crore has been rolled over within the subsequent fortnightly auctions, Das mentioned.
In parallel, entry to the fixed-rate in a single day reverse repo has been saved open, he mentioned, including markets have tailored and even welcomed the VRRR in view of the upper remuneration it provides relative to the fixed-rate in a single day reverse repo.
‘Fears that the recommencement of the VRRR tantamount to liquidity tightening have been allayed. We have seen a better urge for food for the VRRR by way of the bid-cover ratio within the auctions,’ he famous.
Considering all these points, it has now been determined to conduct fortnightly the VRRR auctions of Rs 2.5 lakh crore on August 13, 2021; Rs 3 lakh crore on August 27, 2021; Rs 3.5 lakh crore on September 9, 2021; and Rs 4 lakh crore on September 24, 2021, he mentioned.
‘These enhanced VRRR auctions shouldn’t be misinterpret as a reversal of the accommodative coverage stance, as the quantity absorbed beneath the fixed-rate reverse repo is anticipated to stay greater than Rs 4.0 lakh crore on the September-end 2021. Needless so as to add that the quantity accepted beneath the VRRR window varieties a part of system liquidity,’ he mentioned.
On extra liquidity measures, the governor mentioned the scope of the on-tap TLTRO scheme, initially introduced on October 9, 2020, for 5 sectors, was additional prolonged to the burdened sectors recognized by the Kamath Committee in December 2020 and financial institution lending to NBFCs in February 2021.
The working interval of the scheme was additionally prolonged in phases until September 30, 2021.
Given the nascent and fragile financial restoration, it has now been determined to increase the on-tap focused long-term repo operation (TLTRO) scheme additional by a interval of three months until December 31, 2021, he mentioned.
On March 27, 2020, he mentioned, banks had been allowed to avail of funds beneath the marginal standing facility (MSF) by dipping into the Statutory Liquidity Ratio (SLR) as much as a further one per cent of internet demand and time liabilities (NDTL), i.e. cumulatively as much as 3 per cent of NDTL.
To present consolation to banks on their liquidity necessities, together with assembly their Liquidity Coverage Ratio (LCR) requirement, this leisure which is presently accessible until September 30, 2021, is being prolonged for an extra interval of three months, as much as December 31, 2021.
This dispensation supplies elevated entry to funds to the extent of Rs 1.62 lakh crore and qualifies as high-quality liquid property (HQLA) for the LCR.