National Desk, Jan 30: In a bid to address prevailing liquidity conditions and support market participants, the RBI on Tuesday announced the injection of Rs 5,000 crore into the financial system. This targeted liquidity boost will be made available to Standalone Primary Dealers (SPDs) under the Standing Liquidity Facility (SLF) starting January 31, 2024.
The decision comes in light of the central bank’s assessment of current and evolving liquidity dynamics. The RBI statement highlighted the intent to address potential tightness in the financial system and ensure the smooth functioning of the government securities market.
The additional liquidity will be accessible at the prevailing repo rate of 6.50%. Individual SPDs will receive specific allocation limits communicated directly by the RBI. Notably, all other terms and conditions of the SLF facility remain unchanged.
Standalone Primary Dealers play a crucial role in the Indian financial system. Authorized by the RBI, these entities facilitate the buying and selling of government securities, thereby enhancing market liquidity and efficiency. By providing targeted liquidity support to SPDs, the RBI aims to strengthen their participation in government securities auctions and foster stable market operations.
This liquidity infusion is expected to have a positive impact on the overall financial system. Improved access to funds for SPDs can translate into smoother government securities auction settlements and potentially lower borrowing costs for the government. The move also reinforces the RBI’s commitment to maintaining financial stability and supporting market participants during periods of potential tightening.
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