By Dharamraj Dhutia
MUMBAI (Reuters) – The Reserve Bank of India will step up its liquidity infusion and inject over $16 billion next week into the banking system, which will see large outflows owing to tax payments.
The RBI has doubled the quantum of government securities it aims to purchase to 400 billion rupees ($4.61 billion) on a review of current and evolving liquidity conditions.
The RBI bought bonds worth 400 billion rupees on Thursday, after an initial announcement it would purchase only 200 billion rupees.
“The increase in the quantum was largely expected after a similar action this week,” said VRC Reddy, treasury head at Karur Vysya Bank. “We would need OMO purchases of more one trillion rupees till the end of this financial year.”
For next week’s auction, the central bank has also included the benchmark 6.79% 2034 security for this debt purchase.
It had bought around 50 billion rupees of this paper in its first debt purchase in January, but did not include it in the second OMO auction.
The RBI has infused around 2.68 trillion rupees into the banking system over the last month through a combination of OMO purchases, secondary market debt purchases, dollar/rupee swap and longer duration variable rate repo auctions.
It has also been providing funds through daily overnight repos, and adjusting the quantum based on the system’s requirement.
Nearly two-thirds of these repos have not been fully subscribed, indicating the central bank has been offering funds generally in line or above market requirements.
Separately, the RBI has also announced a four-day variable rate repo auction for 1 trillion rupees which will take place on Monday.
Payment towards Goods and Service Taxes will take place around February 20, with traders estimating outflow in the range of 1.6 trillion rupees to 2 trillion rupees.
RBI steps Fund infused in
billion rupees
OMO purchase via auction 600.2
Screen-based bond purchases 388.15
FX Swap 440
56-day repo 500.1
49-day repo 750.03
Planned 4-day repo on Feb 17 1000
Planned OMO purchase on Feb 20 400
Total inflows 4078.48
($1 = 86.7400 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Krishna Chandra Eluri)
