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RBI to infuse Rs 1 lakh crore via term repo auction to provide additional liquidity in system

24 Mar 2020 Evaluate

The Reserve Bank of India (RBI) has decided to inject Rs 1 lakh crore through term repo auction to provide additional liquidity in the system which was hit by the coronavirus outbreak and assured such move further also if required. The first tranche of term repo worth Rs 50,000 crore was conducted on March 23 2020, while the second tranche of the same amount will be conducted on March 24, 2020.

The RBI's move is aimed at providing cheaper money to banks at the repo rate, thus improving liquidity in the banking system. The RBI is monitoring the evolving financial market conditions. It will calibrate its operations to meet any need for additional liquidity support, if warranted, to ensure normal functioning of markets, promote staff welfare and preserve financial stability.

As a special case, standalone primary dealers will be allowed to participate in these auctions along with other eligible participants. Banks would be required to place their requests for the amount sought under long-term repo operation (LTRO) during the window timing at the prevailing policy repo rate. Bids below or above policy rate will be rejected.

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