Reserve Bank of India (RBI) announces measures to improve liquidity, cuts Bank Rate and Marginal Standing Facility (MSF) by 50 bps to 9%.
Reserve Bank of India (RBI) on October 7, 2013 cut the Bank Rate and Marginal Standing Facility (MSF) rate by 50 basis points to 9% to improve liquidity in the banking system.
In it’s Mid-Quarter Review of September 2013, RBI began a calibrated withdrawal of exceptional measures undertaken since July 2013. This was done with a view to normalizing liquidity conditions. Accordingly, the MSF rate was reduced by 75 basis points from 10.25 per cent to 9.5 per cent.
According to the press release of Reserve Bank of India, Open Market purchase Operations (OMO) of Rs. 9,974 crore were conducted on Monday to inject liquidity into the system. “On a review of evolving liquidity conditions and in continuation of this calibrated unwinding, it has been decided to reduce the MSF rate by a further 50 basis points from 9.5 per cent to 9.0 per cent with immediate effect,” the release said.
RBI will also provide additional liquidity through term repos of 7-day and 14-day tenor for a notified amount equivalent to 0.25 per cent of net demand and time liabilities (NDTL) of the banking system through variable rate auctions on every Friday beginning October 11, 2013. “The notified amount and tenor of the term repo auctions will be announced prior to the dates of the auctions. Detailed guidelines regarding term repos are being issued separately,” the central bank said.
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