Coronavirus: RBI to inject Rs 30,000-crore liquidity in the market next week

Walking on the line of its talk that it is ready to do what is can do to contain the economic impact of coronavirus, COVID-19, the Reserve Bank of India (RBI) on Friday said that it will inject liquidity of Rs 30,000 crore through open market operations next week. This injection will help the RBI in maintaining financial stability in the system.

The Central Bank stated that it will conduct the operation in two tranches of Rs 15,000 crore each in March 2020. It said that the auctions would be conducted on March 24, 2020, and March 30, 2020. The first auction will take place next Tuesday when a set of four bonds - maturing in three, five, six and nine years – are traded.

The first OMO purchase auction of the following Government securities through a multi-security auction using the multiple price method:

There is no notified amount against any of these securities within the aggregate ceiling of Rs 15,000 crores set for the operation. It also said that with the COVID-19 related dislocations, the stress in certain financial market segments is still severe and financial conditions remain tight.

RBI in its notification says, "The result of the auction will be announced on the same day and payment to successful participants will be made during banking hours on March 26, 2020. Successful participants should ensure the availability of the requisite amount of securities in their SGL accounts by noon on March 26, 2020."

It added that it endeavours to ensure that all markets segments function normally with adequate liquidity and turnover. The central bank had already infused Rs 10,000 crore through open market operations yesterday.

The RBI since its last meeting of policymakers one and a half month ago has cumulatively infused liquidity worth about Rs 1.5 lakh crore in the banking system even as financial assets across the globe are roiled by an unprecedented lockdown that seeks to restrain he virus from proliferating.

Just three days earlier, it had announced first OMO purchase in the last two months for Rs 10,000 crore.

In its February bi-month policy, RBI had first announced long-term repo operations (LTRO) to infuse rupee liquidity of Rs 1 lakh crore. Earlier this week, the RBI in its unscheduled press conference announced a similar measure - of the same quantum. Later, RBI conducted a dollar-swap auction for $2 billion where it injected dollar liquidity. Similar operations will be conducted next Monday.