RBI offers additional Rs 5,000 crore to Standalone PDs to ease tight liquidity

The RBI said this was decided based on an assessment of the prevailing and evolving liquidity conditions.

The Reserve Bank of India (RBI) on January 30 said it has decided that an additional aggregate amount of Rs 5,000 crore will be made available to the Standalone Primary Dealers (SPDs) under the Standing Liquidity Facility.

This will be available at the prevailing repo rate of 6.50 percent, starting from January 31, the central bank said in a press release.

A primary dealer is an RBI-registered entity that is authorised to buy and sell government securities. There are two types of primary dealers in India – standalone primary dealers and bank primary dealers.

Standalone primary dealers are either subsidiaries of scheduled commercial banks or entities incorporated abroad or those incorporated under the Companies Act and registered as non-banking financial companies.

The central bank said this was decided based on an assessment of the prevailing and evolving liquidity conditions.

“The incremental limits for individual SPDs is being conveyed to them separately,” the RBI said in the release.

Liquidity in the banking system is estimated to be in deficit of around Rs 2.59 lakh crore. The liquidity in the banking system remained in deficit in the last few months and the central bank tried it manage by conducting various variable rate repo auction.

In January, the RBI conducted five VRR auctions worth Rs 7.50 lakh crore, including current announcement. For these auctions, banks have shown heavy response and submitted more than twice bids but the central bank accepted only the amount close to the notified auction amount.

Last year, the central bank made a similar announcement on March 30 and made available additional Rs 5,000 crore liquidity.