RBI announces new measures to ease transient pressures

September 17th, 2008 - 1:44 am ICT by IANS  

Mumbai, Sep 17 (IANS) The Reserve Bank of India (RBI) announced Tuesday evening that it would alleviate transient pressures on the local market by temporarily relaxing rules on securities used for liquidity operations.According to a statement released by RBI, “The recent extraordinary global developments triggered by the bankruptcy, sell-out and restructuring of some of the world’s largest financial institutions have resulted in severe disruptions of international money markets, sharp declines in stock markets across the globe and extreme investor aversion.

India’s central bank said, “Several central banks and financial regulators have responded with both unusual and unconventional measures to facilitate the orderly operation of financial markets and to ensure financial stability.”

To ease these pressures, it has decided to take a series of measures to ensure cash flow in both the local money market and the Forex market.

The bank will also function second money market on daily basis between 4-4.30 p.m. compared to every Friday till now.

RBI will also allow banks to acquire additional liquidity up to one percent of their deposits, in addition to the normal method of borrowing funds. Both liquidity measures take effect from Wednesday.

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