HYDERABAD : Perhaps to stem the market crash, the Reserve Bank of India (RBI) advanced its secondary bond buying programme or the long-term repo operations of Rs 1 lakh crore originally, scheduled for the next week.
The variable rate 16-day repo operations to infuse liquidity into the system will be held on Monday and Tuesday, as a pre-emptive measure to tide over any frictional liquidity requirements on account of dislocations due to COVID-19, it said.
Besides, the central bank also rescheduled open market operations (OMO) of Rs 15,000 crore, where it buys bonds from the secondary market, to March 26 from March 30 scheduled earlier. The first tranche will be conducted on Tuesday. The RBI has so far announced $4 billion in forex swaps, Rs 40,000 crore bonds through OMOs, and Rs 1 lakh crore via one and three-year long-term repo operations.
“Instead of a repo rate cut, the RBI is taking these unconventional measures to infuse liquidity...A rate cut of at least 50 bps still remains on cards,” said Rahul Gupta, research head, Currency, Emkay Global Financial Services.
Meanwhile, the RBI extended the priority sector classification for bank loans to NBFCs for on-lending for FY21. Moreover, all existing loans disbursed under the on-lending model will continue to be classified under priority sector till the date of repayment/maturity, it said.
Bank credit to registered NBFCs (other than MFIs) and HFCs for on-lending will be allowed up to an overall limit of five per cent of individual bank’s total priority sector lending. Banks will compute the eligible portfolio under on-lending mechanism by averaging across four quarters, to determine adherence to the prescribed cap.