Liquidity in surplus; to meet needs through available instruments: RBI

In a bid to quell concerns over shortage of cash, the Reserve Bank of India Thursday said that there is surplus liquidity in the system, and it will ensure durable liquidity by using various available instruments depending on market conditions.

Citing proactive steps taken in the last few days, RBI said it conducted open market operation (OMO) on September 19 and provided a liberal infusion of liquidity through term repos in addition to the usual provision via the liquidity adjustment facility (LAF).

It further said that another OMO will be conducted Thursday to ensure adequate liquidity in the system.

As of September 26, banks had availed of Rs 1.88 lakh crore through term repos from the Reserve Bank, the apex bank said in a statement.

"As a result of these steps, the system liquidity is in ample surplus," it said.

RBI further announced relaxation in statutory liquidity ratio (SLR) requirement with effect from October 1, 2018.

"This should supplement the ability of individual banks to avail of liquidity, if required, from the repo markets against high-quality collateral. This, in turn, will help improve the distribution of liquidity in the financial system as a whole," it said.

"Going forward, the Reserve Bank stands ready to meet the durable liquidity requirements of the system through various available instruments depending on its dynamic assessment of the evolving liquidity and market conditions," it added.

Concerns of liquidity crunch were triggered following defaults by an IL&FS group company. It spread to non-banking financial companies (NBFCs), which in turn roiled financial markets.

IL&FS Financial Services, a group company of IL&FS, defaulted on one of its commercial paper issuances due for repayment on Monday. This was the third default by the company.