The Reserve Bank of India on Wednesday assured the markets that it will take actions, including open market operations, to ensure adequate liquidity support in the system.
The central bank’s assurance follows hardening of yields on government securities after governor Raghuram Rajan increased the repo rate, or the rate at which banks borrow from the RBI, by 25 basis points on Friday.
“Liquidity conditions have been tightening as reflected in the hardening of yields in the government securities market due to uncertainties around the government borrowing programme for the second half of 2013-14 as well as the prospective effects of banks’ half-yearly account closure, the seasonal pick-up in credit demand, festival-related demand and sluggish deposit growth,” the RBI said.
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