RBI Announces Measures to Foster Orderly Market Conditions.

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The Reserve Bank of India vide its notification dated 31st August 2020 has decided to conduct additional special open market operation involving the 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 Reserve Bank will conduct term repo operations for an aggregate amount of ₹100,000 crore at floating rates 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 and availing funds at the current repo rate of 4 per cent. Details are being notified separately.

Currently, banks are required to maintain 18 per cent of their net demand and time liabilities (NDTL) in statutory liquidity ratio (SLR) securities. The extant limit for investments that can be held in held for trading (HTM) category is 25 per cent of total investment.

The RBI further added that it will use all instruments to revive the economy by maintaining congenial financial conditions, mitigate the impact of COVID-19 and restore the economy to a path of sustainable growth while preserving macroeconomic and financial stability.

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