The Reserve Bank of India (RBI) Governor Shaktikanta Das on June 4 announced that another round of Government Securities Acquisition Program (G-SAP 1.0) worth Rs 40,000 crore will be conducted on June 17. Additionally, G-SAP 2.0 of Rs 1.2 lakh crore will be conducted in Q2 FY22.
Of the additional round under G-SAP 1.0, Rs 10,000 crore would constitute purchase of state development loans (SDLs), the RBI governor said.
"The specific dates and securities under G-SAP 2.0 operations will be indicated separately. We do expect the market to respond appropriately to this announcement of G-SAP 2.0," Das said.
In its April monetary policy review, the RBI had announced secondary market G-SAP 1.0. Under the programme, the central bank committed upfront to a specific amount of open market purchases of government securities with a view to enable a stable and orderly evolution of the yield curve amid comfortable liquidity conditions. It had planned a G-SAP of Rs 1 lakh crore for Q1 FY22.
“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 percent of net demand and time liabilities (NDTL), effective May 22, 2021,” Das said.
The RBI’s Monetary Policy Committee (MPC), which sets interest rates in India, on June 4 kept key policy rates unchanged citing the persisting uncertainties on the economic front.
The MPC was keeping the repo rate at 4 percent and reverse repo rate at 3.35 percent, Das announced.
"MPC has decided to continue with accomodative stance until necessary to mitigate impact of COPVID-19," Das said.
The RBI’s action was in line with the consensus among economists about a status-quo in rates.
The central bank also downgraded the GDP growth forecast for FY22 to 9.5 percent compared with 10.5 percent earlier.
Das also announced additional measures to help ailing businesses such as an on tap liquidity window for contact intensive sectors such as travel and tour operators, hotels and restaurants, aviation ancillaries, spas and other related services.
"In order to mitigate the adverse impact of the second COVID-19 wave on contact intensive sectors, a separate liquidity window of Rs 15,000 crore is being opened till March 31, 2022, with tenors of up to three years at the repo rate," Das said.
Banks will be allowed to park their surplus liquidity equivalent to the size of the loan book created under this scheme under the reverse repo window at a rate 25 basis points lower than the repo rate.
The central bank also announced tweaks to the resolution framework 2.0, or its new restructuring scheme, to enable more people to access liquidity under it. It raised the ceiling on maximum exposure to a single borrower to Rs 50 crore from Rs 25 crore for individuals and small businesses under the scheme.
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On May 5, the RBI had allowed lenders to carry out a fresh round of restructuring of retail and micro, small and medium enterprises (MSME) accounts. Individuals and small businesses with loans of up to Rs 25 crore who have never undergone restructuring before and who were classified as standard as on March 31, 2021 are eligible under the new scheme, titled resolution framework 2.0.
Among other measures, the central bank had on May 5 opened an on-tap liquidity window of Rs 50,000 crore with tenors of up to three years at the repo rate for ramping up COVID-related healthcare infrastructure and services in the country. It announced special three-year long-term repo operations of Rs 10,000 crore at the repo rate for small finance banks, to be deployed for fresh lending of up to Rs 10 lakh per borrower.
To enable states to better manage their fiscal situation, the RBI relaxed conditions for accessing overdraft (OD) facilities. The maximum number of days of OD in a quarter was increased to 50 days from 36 days earlier and the number of consecutive days of OD to 21 days from 14 days.
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