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Inflation focused RBI now moves to absorb excess liquidity
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SME Times News Bureau | 08 Apr, 2021
With an eye on inflation and surplus liquidity in the
system, the RBI on Wednesday decided to conduct variable rate reverse
repo (VRRR) auctions of longer maturity.
The apex bank had recommenced VRRR auctions since January 15, 2021 but the tenor had been shorter at 14 days.
The
fresh long duration VRRR is being launched as indicated in the Revised
Liquidity Management Framework announced on February 6, 2020.
The
amount and tenor of these auctions will be decided based on the
evolving liquidity and financial conditions, RBI Governor Shaktikanta
Das said while presenting the MPC decisions.
It would be
worthwhile to note that despite the recommencement of 14-day variable
rate reverse repo (VRRR) auctions since early 2021, liquidity absorbed
through the fixed rate reverse repo has steadily increased from a
fortnightly average of Rs 4.3 lakh crore during January 16-29 to Rs 4.9
lakh crore during January 30-March 31, 2021.
Also, the surplus
liquidity has been reflected with reserve money rising by 14.2 per
cent(YoY) as on March 26, 2021 driven by currency demand, while money
supply (M3) growing by 11.8 per cent (YoY) (as on March 26), with bank
credit growth at 5.6 per cent(YoY) (as on March 26).
"In view of
the success of VRRR and given the rising level of surplus liquidity, it
has now been decided to conduct VRRR auctions of longer maturity...This
is a part of RBI's liquidity management operations and should not be
read as liquidity tightening," Das said.
"In fact, by paying a
higher rate of interest on liquidity absorptions through the VRRR
auctions, the RBI is indirectly expanding liquidity," he added.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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