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TMI BlogRBI announces Measures to address Market ConditionsX X X X Extracts X X X X X X X X Extracts X X X X ..... RBI announces Measures to address Market Conditions - News and Press Release Dated:- 21-8-2013 - News - On July 15, 2013, the Reserve Bank of India had announced measures for liquidity tightening in order to raise the short-term interest rate and thereby curb volatility in the exchange rate. These measures were recalibrated on July 23, 2013. A review of these measures suggests that the immediate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objective of raising the short-term interest rates has substantially been achieved as evidenced by the money market rates anchoring to the marginal standing facility (MSF) rate of 10.25 per cent. Going forward, the Reserve Bank will calibrate the issue of cash management bills (CMBs), including scaling it down as may be necessary, to keep the money market rates around MSF rate until the volatilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of rupee eases. It is important to address the risks to macroeconomic stability from external sector imbalances. At the same time, it is also important to ensure that the liquidity tightening does not harden longer term yields sharply and adversely impact the flow of credit to the productive sectors of the economy. It may be recalled that in its first quarter monetary policy statement of July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30, 2013, the Reserve Bank had said that the stance of its monetary policy is intended, among other things, to manage liquidity conditions to ensure adequate credit flow to the productive sectors of the economy. In pursuance of this objective, it has been decided that: The Reserve Bank will conduct open market purchase operations (OMOs) of long dated Government of India Securities of Rs.8,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crore on August 23, 2013, and thereafter calibrate them both in terms of quantum and frequency, as may be warranted by the evolving market conditions. The hardening of long term yields has resulted in banks incurring large mark-to-market (MTM) losses in their investment portfolio. Since these MTM losses are partly resulting from abnormal market conditions and could be expected to be largely reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uped going forward, the Reserve Bank has decided to provide the following prudential adjustments for a limited period: Current regulations require banks to bring down their statutory liquidity ratio (SLR) securities in held to maturity (HTM) category from 25 per cent to 23 per cent of their Net Demand and Time Liabilities (NDTL) in a progressive manner in a prescribed time frame. The requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood at 24.5 per cent as at end June 2013. It has now been decided to relax this requirement by allowing banks to retain SLR holdings in HTM category at 24.5 per cent until further instructions. Further, banks will now be allowed to transfer SLR securities to HTM category from available for sale (AFS) / held for trading (HFT) categories up to the limit of 24.5 per cent as a one-time measure. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch transfer of securities from AFS/HFT category to HTM category should be made at the lower of the book value or market value. Banks have the option of valuing these securities for the purpose of such transfer as at the close of business of July 15, 2013. In addition, banks can spread over the net depreciation, if any, on account of MTM valuation of securities held under AFS/HFT categories over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the remaining period of the current financial year in equal instalments. A detailed circular in this regard will be issued shortly. Alpana Killawala Principal Chief General Manager - News - Press release - PIB Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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