With rupee consistently breaching the 60-mark against dollar of late, the Reserve Bank of India (RBI) has unveiled fresh liquidity-sucking measures to shore up the Indian currency.
The central bank said it would auction Government of India cash management bills for a notified amount of Rs. 22,000 crore once every week on Mondays.
Cash management bills are auctioned to help smoothen the temporary liquidity mismatches of the Central Government. These are flexible short-duration instruments, and tend to pay higher yields than bills with fixed maturity.
The RBI said the duration of the auction for next week would be 35-day and 34-day bills of Rs. 11,000 crore each.
“The duration of the auction will be announced one day prior to the date of auction,” it added.
The auctions will be conducted using “Multiple Price Auction” method, and the Cash Management Bills will have the generic character of Treasury Bills.
Since the rupee hit the 61.21 per dollar on July 8, the RBI had been intervening in the foreign exchange market to curb speculation. However, on July 15, it announced a slew of measures to suck out liquidity in the system.
On July 23, it announced additional measures to curb liquidity.
Last Tuesday, the rupee hit another historical low of 61.80 a dollar. The markets were awaiting some more measures from the RBI to contain volatility in the foreign exchange market.
“Over the last two months, the RBI has instituted several measures to contain the volatility in the foreign exchange market. On a review of the impact of these measures and for effective liquidity management, it has been decided that the RBI will auction Government of India Cash Management Bills,” RBI said in a release.
The latest move on weekly auction of cash management bills comes even as the earlier measures of the RBI did not bring about the desired results.
However, the Thursday release of RBI did not provide any details on how long it intends to carry on the CMB auctions.
