RBI to conduct OMO on Friday to infuse Rs10,000 crore into the financial system

Reflecting tight liquidity situation, banks on Tuesday borrowed Rs1.20 lakh crore from the RBI under the repo window. The borrowings amounted to Rs1.42 lakh crore on Monday

 
The Reserve Bank of India (RBI) on Tuesday announced that it will inject Rs10,000 crore into the financial system by purchasing government securities on Friday as part of its liquidity injection measure.
 
“Consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions, the RBI has decided to conduct Open Market Operations (OMO) by purchasing government securities for an aggregate amount of Rs10,000 crore on 22 March 2013 through multi-security auction,” the RBI said in a statement.
 
The central bank will auction four government securities with maturity in 2014, 2016, 2017 and 2026.
 
Reflecting tight liquidity situation, banks on Tuesday borrowed Rs1.20 lakh crore from the RBI under the repo window. The borrowings amounted to Rs1.42 lakh crore on Monday.
 
Earlier in the day, in its mid-quarter review of the monetary policy, the RBI said that with government cash balances with the central bank persisting at higher than normal level, the liquidity deficit, as reflected by the net drawals by banks under the liquidity adjustment facility (LAF), has remained above the indicative comfort zone.
 
The reduction in the cash reserve ratio (CRR) of banks by 25 basis points, effective from 9th February and open market purchases of Rs20,000 crore since February have enabled money market rates to remain anchored to the policy repo rate.
 
“The RBI will continue to actively manage liquidity through various instruments, including open market operations, so as to ensure adequate flow of credit to productive sectors of the economy,” the central bank said.
 

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Power ministry unveils ratings for distribution companies

The programme covers all the 39 state power discoms. It, however, does not cover state energy departments and private discoms

 

The Union power ministry on Tuesday launched a ratings programme for distribution utilities which would enable them to procure loans at better interest rates based on their financial, managerial and regulatory performances.

 

These entities would be rated on the basis of seven parameters, including financial status, meeting regulatory norms and others, power minister Jyotiraditya Scindia said while releasing ratings for distribution companies (discoms).
 

State-run Power Finance Corporation, which is coordinating the programme, has appointed ICRA and CARE to assign ratings. The programme covers all the 39 state power discoms. It, however, does not cover state energy departments and private discoms.
 

Scindia said that integrated rating would facilitate realistic assessment of performance of distribution utilities and would enable them to weigh their strengths and weaknesses.
 

“It will enable identification of areas of concern that adversely impact their performance and incentivise utilities to improve their operational and financial performance,” power secretary P Uma Shankar stated.
 

This annual exercise would cover year-on-year comparison of AT&C losses, regulatory environment, payments of subsidy and cross subsidy, quality of accounts, assets created, automated pass through of fuel cost, short-term power purchase, debt servicing, etc.
 

The financial performance of the discoms gets the highest weightage in the rating mechanism. Four discoms from Gujarat have received top ratings with very high operational performance and financial performance capability.
 

Meanwhile, when asked about the financial restructuring plan, Scindia said, “I have said that before also... eight states have come on board for the FRP, of the Rs1.9 lakh crore of liabilities Rs1.5 lakh crore would be restructured.”
 

As per the financial restructuring plan approved by the government last year, loans of discoms would be restructured.
 

Taking over of 50% short-term liabilities of discoms by respective state governments is a major proposal in the Central government’s plan.
 

Incentives such as reimbursement of 25% of debt taken over by the state government are part of the scheme.

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