Experts see change of tack in Reserve Bank of India's liquidity handling

They say central bank is focused on durable relief rather than ad hoc support

A wind of change is palpable in the Reserve Bank of India (RBI). On Monday, the central bank opened the liquidity floodgates, bringing relief to commercial banks and financial markets. The liquidity deficit, as measured by the RBI infusing funds through the liquidity adjustment facility (LAF), was over Rs 3 trillion on several occasions in the past week.

 

One of the key steps on Monday was the announcement of a calendar of open-market operations to purchase bonds — a first in five years.

  Also, a 56-day variable rate repo auction was announced, which means banks do not have to