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RBI Will Buy Bonds To Infuse Liquidity

The Reserve Bank of India will buy 10,000 cr. of bonds in an OMO auction on Nov 24 (an Open Market Operations auction between RBI and Banks/PDs who offer bonds to RBI, in return for money). RBI prints the money to pay for the bonds, so in effect it is an “increase” in reserve money (M0).

The increase in interest rates has started to hurt liquidity. Banks have been borrowing heavily from Repo every day from the RBI (more . . .

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