The Indian Central Bank raises the attached between the eve

By dharamraj dhutia

The Central Bank of Mumbai (Reuters) raised the amount of money that it was intending to inject it into the banking system by pumping overnight on Wednesday, after interfering strongly in the foreign exchange market (FX) in the last two sessions.

The Indian Reserve Bank (RBI) offered to pour 2.50 trillion rupee (28.85 billion dollars) through the RISO auction a variable rate overnight, which is the largest pump from the central bank in one day in more than a year.

Joint banks in 1.94 trillion rupee.

Why is it important

The continuous RBI intervention in the foreign exchange market has pressed Rural liquidity. This distress in the banking system will make the price reduction last week be ineffective because lenders will not be able to transfer the benefit of low prices to customers.

Most of the market participants have confirmed that excess liquidity conditions are a prerequisite for the effective transfer of low rates.

Context

The liquidity system in the banking system in India has spread in less than a week to about 2 trillion rupee as on February 11, where traders cite tax flows and aggressive dollar sales by the central bank from among the causes of the jump.

RBI sold between $ 4 billion and $ 7 billion on Monday as it entered the FX market to support the rupee. She continued to sell dollars on Tuesday to support the currency that was struggling due to wallet flows and uncertainty about the American commercial tariffs.

The increase in the amount of leakage comes a day after the central bank doubled the percentage of government securities aimed at buying to 400 billion rupees on Thursday. RBI has arranged more than 1.5 trillion rupees in the system in the last month.

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Main quotes

“Since RBI promised to leak liquidity, which will also support the transmission of price reduction, any aggressive sale of FX will reduce this intention. I think RBI will want to sterilize any major interventions from the foreign that drains local liquidity in a large way, to keep the latter Around it.

($ 1 = 86.7625 Indian rupees)

(Participate in the coverage of Dharamraj Dhutia; Edit by Sonia Cheima)