The Reserve Bank Of India or RBI announced various measures to foster orderly market conditions. Recently, market sentiment has been impacted by concerns relating to the inflation outlook and the fiscal situation amidst global developments that have firmed up yields abroad, the bank noted. Notwithstanding an augmented market borrowing programme for 2020-21, the RBI has managed the borrowing calendar for the first half of the year seamlessly, completing more than 90 per cent of scheduled borrowings of the Centre and States in H1:2020-21. The RBI has assured that the borrowing programme of the Centre and States for the year 2020-21 will be completed in a non-disruptive manner.
The Reserve Bank will conduct additional special open market operation 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. The RBI remains committed to conduct further such operations as warranted by market conditions.
The Reserve Bank will conduct term repo operations for an aggregate amount of Rs 100,000 crore at floating rates (i.e., at the prevailing repo rate) in the middle of September to assuage pressures on the market on account of advance tax outflows. The 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%.
Currently, banks are required to maintain 18% of their net demand and time liabilities (NDTL) in SLR securities. The extant limit for investments that can be held in HTM category is 25% of total investment. Banks are allowed to exceed this limit provided the excess is invested in SLR securities within an overall limit of 19.5% of NDTL. It has been decided to allow banks to hold fresh acquisitions of SLR securities acquired from September 1, 2020 under HTM up to an overall limit of 22% of NDTL up to March 31, 2021 which shall be reviewed thereafter.
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