Mumbai: The Reserve Bank of India (RBI) was all set to inject Rs 2,50,000 crore through its Variable Rate Repo (VRR) auction on Wednesday to enhance liquidity in the banking system.

The Central Bank has stated that the amount has been decided based on an assessment of the liquidity conditions.

The Reserve Bank also said it will be conducting daily Variable Rate Repo (VRR) auctions on all working days in Mumbai, with reversal taking place on the next working day until further notice.

RBI Governor Sanjay Malhotra announced on Friday, after the monetary policy meeting, that the central bank was committed to providing sufficient liquidity in the economy and would take steps to ensure durable liquidity to meet the system’s requirements.

The RBI Governor also said that the RBI was monitoring the rupee closely and taking all necessary steps to keep the Indian currency stable.

According to a Morgan Stanley report, the RBI is expected to proactively manage liquidity and take some additional measures (OMO purchases/FX swaps) as the liquidity deficit rises towards the end of March. If the growth recovery is lacklustre, driven by weaker domestic demand and uncertainty from global factors, we see the risk of a longer rate-cut cycle.

To support its point, the report referred to the RBI governor’s statement, highlighting that there is a trade-off between stability and efficiency that should be kept in mind on the regulatory front. He said that this trade-off will be kept in mind while formulating regulations.

In a big relief for banks, RBI Governor Malhotra announced that the implementation of the proposed Liquidity Coverage Ratio (LCR), as well as project financing norms, will be deferred by a year and will not be implemented before March 31, 2026.

He said the step has been taken because the earlier March 2025 deadline does not give sufficient time for implementing these guidelines. He added that the RBI does not want to disrupt the financial system and will ensure a smooth transition.

Both public and private banks opposed the implementation of these norms, announced by former RBI Governor Shaktikanta Das, as they feared they would cause a liquidity crisis in the financial system. The heads of banks raised the issue with Malhotra shortly after he took over as RBI Governor, as Das’s tenure was coming to an end.

 

 

 

 

 

 

—IANS