Coronavirus outbreak: RBI says 'closely monitoring' situation, will take measures for market stability

The Reserve Bank of India (RBI) on Friday said it is closely monitoring the current global situation and assured that it will take all steps to keep markets adequately liquid and stable

Press Trust of India March 13, 2020 15:51:54 IST
Coronavirus outbreak: RBI says 'closely monitoring' situation, will take measures for market stability

Mumbai: The Reserve Bank of India (RBI) on Friday said it is closely monitoring the current global situation and assured that it will take all steps to keep markets adequately liquid and stable.

The statement comes at a day when trading on the Indian stock exchanges hit a "circuit breaker" -- first time since 2008 -- as soon as markets opened on Friday.

"The RBI is closely and continuously monitoring the rapidly evolving global situation and will take all necessary measures to ensure that money, debt and forex markets remain adequately liquid and stable, and continue to function normally," the RBI said in a statement.

Both Sensex and Nifty plunged over 10 percent in the opening session, hitting their lower circuit levels, as new coronavirus -led recession fears triggered panic selling in the market.

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File image of RBI. AFP

Stock exchanges had halted trading for 45 minutes within 15 minutes of market opening. Normal trading resumed around 1030 hours.

In the currency markets, the Indian rupee recovered sharply to trade 46 paise higher at 73.82 against the US dollar. At open, the rupee fell to a record low of 74.5075 against the US dollar.

The RBI also announced to infuse an additional short-term liquidity of Rs 25,000 crore in to the system to counterbalance the domestic liquidity effects on account of dollar sell-buy swap on Friday.

It conducted Rs 25,000 crore of a variable rate repo auction with a 7-day tenor.

On Thursday, the RBI had announced to undertake six-month US dollar sell/buy swaps to provide liquidity to the foreign exchange market amid evolving financial market conditions and taking into consideration the requirement of US dollars in the market.

To start with, an amount of $2 billion would be offered on 16 March, 2020.

The swap will be in the nature of a simple sell/buy foreign exchange swap from the Reserve Bank side.

A bank will buy US Dollars from the RBI and simultaneously agree to sell the same amount of US Dollars at the end of the swap period.

The RBI also said the minimum bid size for the swap auction will be $10 million and in multiples of $1 million thereafter.

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