The Reserve Bank of India (RBI) Monday announced several measures including two more tranches of special open market operations (OMOs) in bonds and a hike in the held-to-maturity (HTM) limit under the statutory liquidity ratio (SLR) for banks, so as to “ensure orderly functioning of financial markets”.
Announcing the new measures on a day when the Sensex tanked 839 points and the Centre announced GDP contraction by 23.9 per cent in Q1, the RBI said it will conduct additional special OMO involving 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 and September 17. “The RBI remains committed to conduct further such operations as warranted by market conditions,” it said. The six-month moratorium on loan repayments also ended on Monday.
The central bank will also conduct term repo operations for an aggregate amount of Rs 1,00,000 crore at floating rates (at the prevailing repo rate) in the middle of September to assuage pressures on the market on account of advance tax outflows. In order to reduce the cost of funds, banks that had availed of funds under long-term repo operations (LTROs) may exercise an option of reversing these transactions before maturity. “Thus, the banks may reduce their interest liability by returning funds taken at the repo rate prevailing at that time (5.15 per cent) and availing funds at the current repo rate of 4 per cent,” it said.
The RBI has also decided to allow banks to hold fresh acquisitions of SLR securities acquired from September 1, under HTM up to an overall limit of 22 per cent of NDTL up to March 31, 2021.
Report: 75% of cos that availed moratorium below investment grade
Mumbai: Close to 1,700 companies, or three out of four entities, that availed of moratorium on loan repayments are rated in the sub-investment grade, Crisil said. The six-month moratorium on loan repayment announced by the RBI ended on Monday.
“Only one out of four companies that availed of the moratorium is rated in the investment grade (rated Crisil BBB- or higher). They took recourse to moratorium to build a liquidity cushion for exigencies in the near term,” Crisil said in a report after analysing the financial profile of 2,300 companies. —ENS Economic Bureau
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