RBI allows oil bonds as collateral for liquidity auctions

RBI allows oil bonds as collateral for liquidity auctions

Last Updated: Sat, Nov 26, 2016 12:53 hrs
People walk past the Reserve Bank of India (RBI) head office in Mumbai

Mumbai: The Reserve Bank of India has relaxed its liquidity auction rules by expanding the basket of securities that will be accepted as collateral for the repo, reverse repo and marginal standing facility tenders, it said on Friday.

The RBI is making oil bonds eligible for the liquidity auctions, adding that there will be no margin requirement on reverse repo auctions where the central bank has to give securities against surplus money deposited by banks.

Banks have been tendering up to about 4 trillion rupees ($58 billion) in reverse repo auctions with the RBI which led to concerns that the central bank may soon run out of government securities to offer to banks if the deposits shoot up sharply.

That is likely to have prompted the RBI to expand the basket of collateral to oil bonds as well, dealers said. The changes will be effective from Monday.

Indian banks have been flushed with billions of dollars of deposits after the government announced withdrawal of high value currency notes to unearth black money.

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