Mumbai: In February last year, RBI had announced a revised Liquidity Management Framework (LMF) that was simplified and “clearly communicated” the objectives and toolkit for liquidity management.
However, in view of the COVID-19 outbreak, the rapidly evolving financial conditions and taking into account the impact of disruptions due to the lockdown, RBI had decided to temporarily suspend the revised LMF and the window for Fixed Rate Reverse Repo and Marginal Standing Facility (MSF) operations were made available throughout the day.
This was intended to provide eligible market participants with greater flexibility in their liquidity management.
“On a review of evolving liquidity and financial conditions, it has been decided to restore normal liquidity management operations in a phased manner,” RBI said.
Accordingly, it will conduct a Variable Rate Reverse Repo auction on January 15, 2021 under the revised LMF issued on February 6, 2020. The notified amount is Rs 2,00,000 crore, it said.
RBI further said the Fixed Rate Reverse Repo and MSF operations will continue to be available throughout the day.
“As stated in the last MPC (Monetary Policy Committee) statement on December 4, 2020, it is reiterated that the Reserve Bank will ensure availability of ample liquidity in the system,” the central bank added.
