RBI's liquidity bazooka raises rate reduction expectations

RESERVE BANK OF India's (RBI) massive liquidity infusion has fuelled expectations of a repo rate cut on Wednesday.

- SACHIN KUMAR

The RBI has injected nearly ₹7 lakh crore into the banking system through a host of measures, including bond purchases, forex swaps and variable rate repo (VRR) auctions, which analysts view as potential signals of an imminent repo rate cut of 25 basis points.

Out of the total ₹7 lakh-crore liquidity support, the RBI announced on April 1 that it would inject ₹80,000 crore through OMO purchase auctions, to be conducted in four tranches. "At a recent meeting between RBI officials and bankers, lenders emphasised that effective transmission of rate cuts hinges on adequate liquidity support," said a senior official of a public sector bank.