The Reserve Bank of India (RBI) on Friday said that it would inject Rs 40,000 crore into the system in November. The move will stabilize debt market rates and ease the cash crunch in the system. The central bank will do it through the purchase of government securities in order to meet the demands for funds in the festive season.
"Based on an assessment of the durable liquidity needs, the RBI has decided to conduct the purchase of government securities under open market operations for an aggregate amount of Rs 40,000 crore in November," said RBI in a release. "The open market operation amount stated ... is indicative and the RBI retains the flexibility to change it, depending on the evolving liquidity and market conditions," it further said.
In October, the central bank injected Rs 36,000 crore through open market operations (OMO).
Auction date and the government securities that will be purchased in the auctions will be informed in time. The RBI had earlier stated that the system liquidity will move into deficit in the second half of 2018-19 and the evolving liquidity conditions would determine its choice of instruments for both transient and durable liquidity management.
As per the data from India Ratings, the daily liquidity deficit in the banking system has been hovering between Rs 87,500 crore to Rs 1 lakh crore for the past three weeks. Apart from RBI's currency intervention, increased cash withdrawals in the festive season has also caused the deficit.