By Aditya Raghunath
Investing.com – The Reserve Bank of India (RBI) in its announcement today said it would purchase Rs 1.2 lakh crore of bonds under its G-Sec 2.0 Acquisition Program (GSAP) to ensure system liquidity.
This move will also lead to lower yields on government bonds. RBI also said it would continue to continue its ongoing GSAP 1.0 program by purchasing bonds worth Rs 40,000 crore. He will buy state development loans worth Rs 10,000 crore on June 27. This will bring the total acquisition of RBI to Rs 65,000 crore.
“The auctions under G-SAP 1.0 have generated a lot of interest from market participants, with bid coverage ratios of 4.1 and 3.5, respectively, in the two auctions undertaken up to present. The timing of the second auction was to replenish the liquidity drain due to restoring the cash reserve ratio (CRR) to its pre-pandemic level of 4% of net demand and forward liabilities (NDTL), as of May 22, 2021. ”said RBI Governor Shaktikanta Das.
Apart from that, as expected, the RBI kept its key rates unchanged. Repurchase and reverse repurchase agreements are respectively 4% and 3.35%.
RBI also revised its inflation outlook based on the Consumer Price Index to 5.1% for FY22, which is above its target of 4%.