RBI goes easy on liquidity absorption mode

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RBI goes easy on liquidity absorption mode

The money market rates aren't going to fall in a hurry as the RBI goes easy on its liquidity absorption mode, despite the fact that the money market is not going to fall in a hurry as the money market rates aren't going to fall in a hurry.

The central bank had surprised the bond market by announcing a Rs 5 trillion variable rate reverse reverse reverse repoVRRR auction instead of an expected Rs 8 trillion auction, as the economy suffered dislocations due to the ongoing Omicron surge.

The central bank has moved to variable rate reverse repo auctions from this year instead of fixed rate auctions. The reverse repo rate of 3.35 per cent is no longer relevant because of this. The auction cut-offs of variable rate reverse repo are coming near the repo rate, in line with the central bank's plan to move towards a policy rate regime where the rate difference between liquidity absorption and infusion is narrowed to just 25 basis points, it is now 65 basis points. The 10 year bond yields closed at 6.58 per cent, up 2 basis points from its previous close.

The rupee lost ground against the dollar and was above 74 level. The Indian currency closed at 74.15 a dollar, from its previous close of 73.90.