Page 501 - ES 2020-21_Volume-1-2 [28-01-21]

128 Economic Survey 2020-21 Volume 1

ii. OMOs in State Development Loans (SDLs) as a special case were also introduced
during the current financial year. The OMOs were conducted for a basket of SDLs
comprising securities issued by states. Aggregate liquidity to the tune of ` 30,000
crore was injected through three OMO purchase auctions (October 22, 2020,
November 5, 2020 and December 23, 2020) under this facility.

iii. Targeted Long Term Repo Operations (TLTROs) of up to three years’ tenor for a
total amount of ` 1.13 lakh crore for investment in corporate bonds, commercial
papers, and non-convertible debentures, in addition to injection of ` 1.25 lakh crore
through Long Term Repo Operations (LTROs) conducted in February-March 2020.
iv. Reduction in the CRR requirement of banks from 4 per cent of net demand and
time liabilities (NDTL) to 3 per cent with effect from March 28, 2020 augmenting
primary liquidity in the banking system by about ` 1.37 lakh crore.
v. Raising banks’ limit for borrowing overnight under the MSF by dipping into their
Statutory Liquidity Ratio (SLR) to 3 per cent of NDTL from 2 per cent, allowing the
banking system to avail an additional ` 1.37 crore of liquidity.
vi. Special Liquidity Facility for mutual funds for ` 50,000 crore; and
vii. Refinance facility worth ` 75,000 crore for all India financial institutions i.e.,
NABARD, NHB, SIDBI and EXIM Bank.
4.11 In the wake of sell off triggered by risk aversion and flight to safety in the beginning of year
2020, RBI conducted two 6-month USD/INR sell/buy swap auctions on March 16 and March
23, 2020 and injected dollar liquidity of US$ 2.7 billion to meet the increased demand for US
dollars in the foreign exchange market. The measures listed above coupled with forex purchases
resulted in expansion of surplus liquidity, as reflected in average daily net liquidity absorptions
under the liquidity adjustment facility (LAF), from ` 3.43 lakh crore at end of January 2020 to
` 5.47 lakh crore on January 15, 2021 (Figure 5).

Figure 5: Liquidity Management

Source: RBI.
Note: Negative indicates liquidity in surplus.