Commodity Online
NEW DELHI : Reserve Bank of India on Tuesday said another Rs.200 billion would be released for the needs of mutual funds.

The RBI move followed its order to commercial banks not to withhold credit to the corporate sector, especially small firms is considered to be another step by the central bank to ease liquidity concerns.

The RBI further said it would conduct a special 14-day repo at a coupon rate of nine percent for a notified amount of Rs.200 billion to enable banks meet the liquidity requirements of mutual funds.

The banking regulator had earlier reserved the right to conduct such auctions - where government securities are bought back to release cash into the financial system - depending on market conditions.

The move comes on the back of a cut of 150 basis points over the past week in the cash reserve ratio, or the minimum cash banks have to retain against deposit, which was estimated to free some Rs.600 billion for corporate credit.

The central bank also asked commercial banks not to withhold working capital requirement of small and medium enterprises, especially where the amounts were previously approved based on prudent norms and their creditworthiness.