India central bank to infuse 1.25 trillion rupees worth of liquidity via bond purchases

MUMBAI: The Reserve Bank of India will purchase government bonds worth 1.25 trillion rupees ($14.71 billion) via open market operations over four tranches in May, its latest measure to infuse liquidity into the banking system.

The first tranche of 500 billion rupees is scheduled for May 6, followed by three tranches of 250 billion rupees each on May 9, 15 and 19, respectively.

The announcement on Monday is the RBI’s latest liquidity infusion measure, with 1.2 trillion rupees added in April via debt purchases and FX swaps. It is scheduled to buy bonds worth 200 billion rupees on Tuesday, its last tranche for the current month.

The central bank had also reduced the repo rate for a second consecutive time and changed its stance to “accommodative” earlier this month.

Indian rupee may nudge higher, bond yields eye central bank policy minutes

The RBI is expected to keep sufficient surplus in the banking system to ensure policy transmission, and is looking at a level of around 1% of deposits, Governor Sanjay Malhotra said in a press conference after the monetary policy decision on April 9.

The surplus works out to be in the range of 2.20 trillion rupees to 2.50 trillion rupees.

The daily average surplus for the week ended April 25 was 809 billion rupees, down from 1.78 trillion rupees in the previous week, per central bank data.