RBI’s Liquidity Bonus: Rs 1.2 Lakh cr GSAP 2.0; Keeps Rates Unchanged

Published 04-06-2021, 12:55 pm
Updated 04-06-2021, 12:56 pm
© Reuters.

By Aditya Raghunath

Investing.com -- The Reserve Bank of India (RBI) in its announcement today said that it would buy Rs 1.2 lakh crore of bonds under its G-Sec Acquisition Program 2.0 (GSAP) to ensure liquidity in the system.

This move will also cause government bond yields to be lower.  RBI also said that it would continue to pursue its ongoing GSAP 1.0 scheme by purchasing bonds worth Rs 40,000 crore. It will purchase state development loans worth Rs 10,000 crore on June 27. This will RBI’s total acquisition to Rs 65,000 crore.

“The auctions under G-SAP 1.0 have evoked keen interest from market participants, with bid cover ratios of 4.1 and 3.5, respectively, in the two auctions undertaken so far. The timing of the second auction was aimed towards replenishing the drainage of liquidity due to the restoration of the cash reserve ratio (CRR) to its pre-pandemic level of 4% of net demand and time liabilities (NDTL), effective May 22, 2021,” said RBI Governor Shaktikanta Das.

Apart from this, as expected, RBI kept key interest rates unchanged. Repo and reverse repo are at 4% and 3.35% respectively.

RBI has also revised its consumer price index-based inflation outlook to 5.1% for FY22 which is higher than its target of 4%.

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