RBI announces some important steps, including term repo operations totalling Rs. 1 lakh crore in mid-September to ease pressure on the liquidity and maintain congenial financial conditions with a view to ensuring sustainable recovery of economic growth.
Lockdown due to the COVID-19 pandemic has hitten all the sectors barring agriculture in the first quarter of the financial year 2020-2021.
Growth percentage of different sectors from (April – June) 2020
- Agriculture : +3.4%
- Financial Services, Real Estate : -5.3%
- Electricity : -7%
- Public Admin, Defence, Other Services : -10.3%
- Mining : -23.3%
- Manufacturing : -39.3%
- Trade, Hotels, Transport, Communication : -47%
- Construction : -50.3%
- The Central Bank of India said the RBI stands ready to conduct market operations as required through a variety of instruments so as to ensure orderly market functioning.
- The Reserve Bank of India said that in order to reduce the cost of funds, banks that had availed of funds under long-term repo operations (LTROs) may exercise an option of reversing these transactions before maturity.
- Banks may reduce their interest liability by returning funds taken at the repo rate prevailing at that time (5.15%) and availing funds at the current repo rate of 4%.
- RBI has also decided to allow banks to hold fresh acquisitions of statutory liquidity ratio (SLR) securities acquired from September 1, 2020, under Held-To-Maturity (HTM) up to an overall limit of 22 % of net demand and time liabilities (NDTL) up to March 31, 2021, which shall be reviewed thereafter.
- At the time banks are required to maintain 18% of their reserves in SLR securities.
- The extant limit for investments that can be held in the Held-To-Maturity (HTM) category is 25% of total investment.
- RBI will conduct additional special open market operations (OMO) involving the simultaneous purchase and sale of government securities for an aggregate amount of Rs 20,000 crore in two tranches of Rs 10,000 crore each. The auctions would be conducted on September 10, 2020, and September 17, 2020.
Source : All India Radio