This time RBI can transfer a surplus of 2.5 lakh crores to 3 lakh crores to the government. At the same time, experts of Citi estimate that this amount can be from 3.5 lakh crores to 4 lakh crores.
The Reserve Bank of India (RBI) may now slow down the pace of injecting cash into the banking system. In the last 6 months, RBI has injected about Rs 8.57 lakh crore (about $100 billion) of liquidity into the system. Now experts believe that after the large surplus transfer to the government, there will be no need for RBI to inject more cash.
Open market operations paused for now
RBI completed its last scheduled open market bond purchase program (OMO) on Monday. No new OMO announcement has been made after that. Experts believe that the dividend received by the government and then the expenditure from that money will itself bring sufficient cash in the market.
The government may get a surplus of 3 to 4 lakh crores
According to experts, this time RBI can transfer a surplus of 2.5 lakh crores to 3 lakh crores to the government. At the same time, Citi experts estimate that this amount can also be from 3.5 lakh crores to 4 lakh crores. This surplus transfer is likely to be announced before the end of this month.
There will be a lot of liquidity in the system
ICICI Securities Research Head A. Prasanna, while talking to Economic Times, said that the dividend received by the government can bring core liquidity of more than Rs 5 lakh crore in the system. In such a situation, RBI will not need to inject any major cash for the next three months. He believes that RBI can now resort to OMO again only after September.
Decline in bond yield
Due to such a large cash supply and the expectation of softening of interest rates, there has been a stir in the bond market. The 10-year government bond yield has fallen by 38 basis points since the beginning of the current financial year. At the same time, a big decline of 57 basis points has been registered in the 5-year yield.
What will be its effect on the common people?
There is no immediate hope of any major relief in loan rates from this, because RBI will not increase liquidity further at the moment. Budget expenditure may increase due to more surplus to the government, which can strengthen infrastructure and social schemes. Investors may now see stability in interest rates and bond yields.
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