RBI delivers a surprise; slashes MSF rate by further 50 bps

sankrit

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Coming as a bolt out of the blue, the Reserve Bank of India (RBI) after a review of evolving liquidity conditions and in continuation of calibrated withdrawal of exceptional measures undertaken since July 2013, reduced the marginal standing facility (MSF) rate by a further 50 basis points from 9.5% to 9.0% with immediate effect.

Further, the central Bank has also decided providing additional liquidity in the markets through term repos of 7-day and 14-day tenor for a notified amount equivalent to 0.25% of net demand and time liabilities (NDTL) of the banking system through variable rate auctions on every Friday beginning October 11, 2013.

The latest measures suggests of RBI’s growing comfort with Indian currency’s current level of Indian currency which after strengthening considerably, depreciated a bit on Monday. Earlier, too in its Mid-Quarter Review of September 2013, RBI in its effort to normalise liquidity conditions, reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25% to 9.5% and later decided to conduct open market purchase operations of Rs. 9,974 crore were conducted today to inject liquidity into the system.

These latest measures also come at time when there is weakness in American currency, stuck close to 8-month lows against a basket of major currencies as the partial US government shutdown continues with no signs of a softening in the positions of politicians over the debt-ceiling limit or budget impasse.

Source:-berkeleygains
 
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