RBI's Strategic Move to Enhance Liquidity

In a significant step to support the banking system's liquidity, the Reserve Bank of India (RBI) has unveiled a fresh round of government securities (G-Secs) purchases. Scheduled for May, this initiative involves buying back Rs 1.25 lakh crore through open market operations (OMOs).

Details of the Buyback Programme

The programme is structured into four tranches, kicking off with a Rs 50,000-crore auction on May 6. This will be followed by three additional auctions, each worth Rs 25,000 crore, later in the month. This move is an extension of the liquidity-easing measures initiated in April, which included a Rs 40,000-crore OMO and a Rs 1.5-lakh-crore variable rate repo operation, alongside two smaller OMOs.

RBI's Cautious Yet Clear Intent

The central bank stated that this decision is based on its assessment of "current and evolving liquidity conditions". Despite the cautious tone, the scale and timing of these interventions indicate RBI's commitment to maintaining a comfortable level of banking system liquidity, aiming for around 1% of banks' net demand and time liabilities, as highlighted by governor Sanjay Malhotra in his recent post-policy conference.

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