2 thoughts on “Demonetisation – Absorbing the Excess Liquidity…

  1. “To reduce this burden, the government has now allowed RBI to absorb up to Rs 6 lakh crore, up from the limit so far of Rs 30,000 crore only. The permission allowed RBI to conduct its first auction on 2nd Dec and absorbed for Rs 20,000 crore at an annualized interest rate of 6.16%.” I can’t understand these lines, can anyone help me this out.

     
    • Banks were incurring an expenditure on the fresh deposits. RBi absorbed a part of this excess thru first MSS auction (to be followed by more, up to a limit of Rs 6 lakh crore). Banks which purchased these bonds thru the auction, would receive interest payment of 6.16% on these bonds..
      is it clear now..??

       

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