Monetary policy review: Liquidity step was needed, say bond dealers

The higher quantum in variable rate reverse repo (VRRR) window did not come as a major surprise for the bond market, but the dovish tone of the Reserve Bank of India (RBI) had undertones of normalisation.
 
The RBI stopped the Government Securities Acquisition Programme (G-SAP), through which it has infused Rs 2.2 trillion of liquidity in the system. It has purchased Rs 17,000 crore of bonds from the market through its open market operation (OMO) route. The OMOs will continue and so will Operation Twist, in which the RBI simultaneously buys and sells equivalent amounts of bonds. If need