BANK NEWS
RBI said recent liquidity measures help reduce financing costing
New Delhi: On Monday RBI release its monthly bulletin with three different articles which is prepared by Radha Shyam Ratho and Pradeep Kumar of the Financial Markets Operations Department of Reserve Bank of India (RBI). On the following article mentions the surplus liquidity in the system provided by the Reserve Bank amid COVID-19 related dislocations in the financial market has helped reduce financing cost in the corporate bond market to decadal lows.
According to the article, "Abundant liquidity provided through generic (LTROs) as well as targeted instruments (TLTROs), and other policy measures announced by RBI in the backdrop of dislocations observed in the financial markets, have brought down financing costs in the corporate bond market to decadal lows, eased the access of non-AAA rated entities, and led to record primary issuances".
Yields have dropped and the spreads have compressed despite foreign portfolio investment (FPI) outflows of around USD 3 billion from corporate bonds in 2020, it said.
“TLTROs, complemented and backstopped by the special refinance facilities provided to All India Finance Institutions (AIFIs), have helped channelise liquidity to small and mid-sized corporates, including Non-Banking Financial Companies (NBFCs) and micro finance institutions (MFIs),” mentioned.
The article further said the current level of surplus liquidity in the system has ensured that the short-term rates have remained anchored and soft relative to the policy repo rate, aiding monetary policy transmission with positive spillovers to other segments of the market spectrum.
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