MUMBAI: The Reserve Bank of India has decided to revise its liquidity management through which it controls cash in the banking system, a key sauce to rationalise interest rates in line with the policy actions.It has been decided to fine-tune the existing liquidity management framework, the central bank said Thursday as it kept the repo rate unchanged at 5.15 percent in its bi-monthly monetary policy.The central will use a combination of tools including fixed and variable rate repo/reverse repo auctions, open market operations, forex swaps as it may be required depending on market situation.The daily rate repo and four 14-day term repos every fortnight being conducted, at present, are being withdrawn, RBI said in the statement on Development and Regulatory Policies.
If needed, RBI will conduct longer-term variable rate repo/reverse reop operations of more than 14 days.
The weighted average call rate (WACR) will continue to be its operation target.
Call is the rate at which banks lend overnight money each other.RBI will ensure adequate provisions/absorption of liquidity as warranted by underlying and evolving market conditions.at or around the policy rate, it saidThe central bank has considered feedback from a dedicated working group on liquidity management.On operational front, the central bank seeks to give more details on daily money market operations.A quantitative assessment of durable liquidity conditions of the banking system on a fortnightly basis would be published with a lag of one fortnight, said RBI that will consult market participants and other stakeholders for the same.Bond houses or primary dealers can now participate directly in all overnight liquidity management operations.