The RBI on Friday said it would infuse an additional short-term liquidity of Rs 25,000 crore into the system to make up for any deficit of the Indian currency on account of the dollar sell-buy swap it announced on Thursday.

The apex bank conducted a Rs 25,000-crore variable rate repo auction with a 7-day tenor. However, it did not receive any investor interest in the auction.

Under the dollar sell/buy swap to banks, the RBI will sell dollars to the bank and buy them back six months later. The first round of auctions would be held on Monday, under which it will infuse $2 billion in the system.

As the sale of dollars will lead to the sucking out of rupee liquidity from the system, the RBI had announced the variable rate repo auction.

The central bank further reiterated it was closely monitoring the current global situation and assured that it will take all steps to keep markets adequately liquid and stable.

The statement came on a day trading on the Indian stock exchanges hit a “circuit breaker” — the first time since 2008 — as soon as the markets opened on Friday. The markets are expecting a rate cut by the RBI. They are betting on the monetary policy committee of the bank to announce a rate cut prior to its scheduled meeting between March 31 and April 2.

China move

China’s central bank said on Friday it would cut the reserve requirements for banks, releasing some 550 billion yuan ($79 billion) in liquidity as the country fights to control the fallout of the coronavirus.

The People’s Bank of China said that it would cut the reserve requirement ratio on March 16 by 50 to 100 basis points for banks that meet its assessment criteria, reducing the amount of cash they must hold. There will be an additional 100 basis point reduction for eligible joint-stock commercial banks, to support the issuance of loans, said the Chinese central bank.