Primary Dealers To Get Additional Amount Under Liquidity Facility: RBI
The Reserve Bank of India (RBI) will provide an additional amount of funds to standalone primary dealers through the Standing Liquidity Facility, starting from Thursday. This move comes at a time when there is a large deficit of liquidity in the banking system.
The RBI stated that an extra aggregate amount of Rs 5,000 crore will be available to standalone primary dealers under the Standing Liquidity Facility at the prevailing repo rate, starting from 31 January 2024. The repo rate, which is the rate at which the RBI lends funds to banks, is currently at 6.50 per cent. The decision was taken after assessing the current and evolving liquidity conditions.
The Reserve Bank of India (RBI) has said that it will inform individual standalone primary dealers separately about the incremental limit. The Standing Liquidity Facility provided by the RBI is a collateralised liquidity facility for standalone primary dealers.
In the government securities market, primary dealers (PDs) act as market-makers, mandated to buy and sell securities to ensure market depth. PDs can be divided into two categories - those that are part of a bank and those that are standalone.
As of January 29, central bank data showed that the liquidity deficit, measured by the amount of money borrowed by banks from the RBI, was at Rs 2.7 trillion.
