The Reserve Bank of India (RBI) on March 26 said that it has decided to allow Standalone Primary Dealers (SPDs) to participate in all Repo operations, irrespective of the tenor conducted by the central bank.
Earlier, SPDs were allowed to participate in all overnight liquidity management operations (except Marginal Standing Facility).
SPDs were also allowed to participate in other operations such as long-term Variable Rate Repo (VRR) operations and daily VRRs on a case-to-case basis.
In the last few months, the central bank has been injecting liquidity in the banking system due to higher deficit liquidity. This liquidity has been done with various tools such as daily VRR auction, normal VRR or long term VRR auction, USD/INR Buy/Sell swap auction and open market operations (OMO) purchase of government securities.
Despite the higher liquidity infusion, liquidity in the banking remained in deficit mode.
Currently, liquidity in the banking system is estimated to be in deficit of around Rs 1.58 lakh crore.
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