OMOs of the Total Value of Rs 20000 Crores in Two Tranches
The apex bank will conduct OMOs in two tranches worth Rs 10,000 crore each. It will conduct the auction for this special purchase and sale of government securities on September 10, 2020, and September 17, 2020. Further, it stated that the authority remains committed to conducting such operations to ensure orderly market functioning.
Term Repo Operations for Rs 100,000 Crore
The Central banks will also conduct term repo operations for Rs 100,000 crore at floating rates. This will reduce the cost of funds and ease pressure on the market though advancing tax outflows. Further, it explained that banks would be given an option to reverse the transactions under long-term repo operations (LTROs). They can return the funds taken on the previous repo rate, which is 5.15% and get funds at the current repo rate of 4%. This will allow them to reduce their interest liability.
Moreover, RBI has also reduced the requirement of holding HTM (held-to-maturity) category bonds securities from 25% to 22%. Earlier, banks were to maintain 18% of their net demand and time liabilities (NDTL) in SLR securities. The limit for investments that could be held under HTM was 25%. The limit has been extended till 31st March 2021 and will be reviewed after that.
Moderate Consumer Inflation and no Stagflation
RBI governor, Shaktikanta Das, has also ruled out any possibility of stagflation in an interview. Besides, he mentioned that the government might announce another round of fiscal stimulus in a calibrated manner. Regarding consumer inflation, he said that it would moderate in the time to come.
In all, the RBI will use every instrument to restore financial stability and put the economy back on the path of sustainable growth.