Finance, Forex and Investments

Reserve Bank of India purchased Rs 40.000 crores of Govt shares from State Bank of India recently.Why?

Public Comments

1. Because that's how central banks add liquidity to the banking reserves. For example, in the U.S., when the fed wants to add money to the banking reserves, it buys U.S. government bonds. The treasury delivers the bonds to the fed and the fed writes a check to the treasury, which the funds go into the excess banking reserves. In the U.S. it's called the Fed Open Market Operations.