The Reserve Bank of India (RBI) can now slow down the pace of inserting cash in the banking system. In the last 6 months, RBI has inserted about 8.57 lakh crore (about 100 billion dollars) liquidity system. Now experts believe that there will be no need to put more cash from the RBI after the large surplus transfer that the government gets.

Currently on open market operations

RBI completed its last fixed open market bond procurement program (OMO) on this Monday. After that no new OMO announcement has been made. Experts believe that the dividend received by the government and then the expenses incurred from that money will bring sufficient cash in the market itself.

Government can get a surplus of 3 to 4 lakh crores

According to experts, RBI can transfer surplus ranging from 2.5 lakh crore to 3 lakh crore to the government this time. At the same time, CITI experts estimate that this amount can be from 3.5 lakh crore to 4 lakh crore. This surplus transfer is likely to be declared before the end of this month.

There will be a glut of liquidity in the system

Research Head of ICICI Securities A. Talking to the Economic Times, Prasanna said that the dividend received by the government can bring more than 5 lakh crore core liquidity in the system. In such a situation, RBI will not have to add any big cash for the next three months. They believe that RBI can now resort to OMO again only after September.

Decline in bond yield

The bond market has seen a stir due to such a large cash supply and expectation of softening in interest rates. From the beginning of the current financial year, there has been a decline of 38 basis points in the 10-year government bond yield. At the same time, there has been a major decline of 57 basis points in the 5-year-old yield.

What will be the effect on the common people?

This does not expect any immediate relief in loan rates, as RBI will not increase any more liquidity at the moment. The government can increase budget expenses due to more surplus, which can strengthen infrastructure and social schemes. Investors can now see interest rates and stability in bond yields.

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