RBI to resume normal liquidity management operations in phased manner1 min read . Updated: 08 Jan 2021, 09:16 PM IST
- In the wake of coronavirus pandemic in the country, the regulator earlier temporarily suspended the revised liquidity management framework
The Reserve Bank of India on Friday said that it has decided to restore normal liquidity management operations in a phased manner. In February, 2019, the banking regulator announced a revised Liquidity Management Framework (LMF) denoting the objectives and toolkit for liquidity management. "On a review of evolving liquidity and financial conditions, it has been decided to restore normal liquidity management operations in a phased manner," the central bank said.
In the wake of coronavirus pandemic in the country, the regulator earlier temporarily suspended the revised liquidity management framework. "In view of the outbreak of COVID-19, the rapidly evolving financial conditions and taking into account the impact of disruptions due to the lockdown and social distancing, it was decided to temporarily suspend the revised liquidity management framework and the window for Fixed Rate Reverse Repo and Marginal Standing Facility (MSF) operations were made available throughout the day," RBI said in a statement.
"This was intended to provide eligible market participants with greater flexibility in their liquidity management," it added.
The central bank will conduct variable rate reverse repo auction of ₹2 lakh crore on 15 January. It further added further said the Fixed Rate Reverse Repo and MSF operations will continue to be available throughout the day.
"As stated in the last MPC (Monetary Policy Committee) statement on 4 December, 2020, it is reiterated that the Reserve Bank will ensure availability of ample liquidity in the system," the central bank added.
In view of operational dislocations and elevated level of health risks posed by Covid-19, RBI had also decided to truncate trading hours for various market segments with effect from 7 April, 2020.
Later, with the graded easing of lockdown restrictions, it was decided to restore trading hours for markets regulated by the Reserve Bank in a phased manner with effect from 9 November, 2020.