RBI’s liquidity measures explained

Welcome to Top of the Morning by Mint, your weekday newscast that brings you five major stories from the world of business. It's Tuesday, January 29, 2025. This is Nelson John, let's get started.   The Reserve Bank of India has announced a trio of measures aimed at injecting ₹1.5 trillion into the financial system, responding to increasing demands for liquidity from bankers and market participants. The RBI plans to purchase ₹60,000 crore in government securities through open market operations across three sessions, conduct a 56-day variable rate repo auction for ₹50,000 crore, and execute a dollar-rupee sell swap auction of $5 billion. These actions are intended to address a liquidity deficit that has persisted since mid-December 2024, which peaked at over ₹3 trillion. While the RBI's previous interventions have included secondary market operations and adjustments to the cash reserve ratio, these new measures are more comprehensive, offering both immediate relief and setting the stage for potential interest rate adjustments in the upcoming Monetary Policy Committee meeting in February 2025. However, despite these efforts, challenges such as persistent inflation and currency depreciation may influence the timing and nature of further rate cuts. Mint’s banking editor Gopika Gopakumar explains RBI’s recent measures.  The Indian government is escalating its efforts to clear out older, more polluting vehicles by potentially implementing a ban on all vehicles meeting BS I emission standards. Even with valid fitness certificates, these vehicles could soon face mandatory scrapping unless owners take advantage of doubled incentives to upgrade to cleaner BS VI-compliant models. The Ministry of Road Transport and Highways is also deliberating over increasing incentives for BS II vehicles, primarily affecting medium and heavy vehicles, to encourage owners to voluntarily scrap these older models, Subhash Narayan reports. If these increased incentives do not prove effective, a ban on BS II vehicles may also be enacted. These stringent measures are part of India’s broader strategy to tackle vehicular pollution and enhance road safety by removing outdated vehicles from the roads. With BS I vehicles introduced before 2005, this move could affect only a small fraction of the estimated 35-40 crore vehicles in India, yet it marks a significant step towards achieving cleaner air and reducing carbon emissions across the country.   Despite growing momentum in the electric vehicle (EV) sector, the government may not grant 'infrastructure industry' status to the EV charging infrastructure sector in the upcoming budget. This status would allow stakeholders to secure credit at more favourable interest rates. However, insiders told Manas Pimpalkhare that this is unlikely as the sector already benefits from substantial support under the PM E-drive scheme, launched in October 2024, which dedicates ₹2,000 crore to establishing public charging stations over two years. Additionally, public sector oil marketing companies are significantly investing in EV charging, with plans to spend ₹20,000 crore on infrastructure expansion. This rapid development aligns with India's ambitious goal to have 30% of vehicles electric by 2030, addressing the crucial issue of range anxiety among potential EV buyers.   The AI sector is witnessing rapid evolution, and DeepSeek AI, a Chinese startup, is notably challenging established norms with its cost-effective, open-source AI model. This model is shaking up traditional dependencies on expensive GPUs and massive data centers, proving that efficient AI can be developed more economically. DeepSeek utilized less expensive Nvidia H800 chips for its DeepSeek-V3 model, managing to slash development costs to under $6 million. This is in stark contrast to the billions reportedly spent by OpenAI for similar capabilities. The implications for India are significant, as DeepSeek’s approach could be a game-changer for startups and research institutions that often operate under financial constraints. By adopting similar cost-effective methodologies, India could foster its own AI innovations without hefty investments, leading to sustainable developments in AI that cater to local and global standards.   The shift from satellite to digital platforms has fundamentally changed film financing, making OTT partnerships essential before production begins. This shift comes as producers face heightened risks at the box office, prompting many to pause or shelve projects without secured streaming deals. Films lacking OTT partners often struggle post-theatrical release, highlighting the industry's increasing reliance on digital revenues amidst fluctuating box office returns. OTT platforms have become more cautious, backing out of deals when films underperform, leading to a more selective acquisition strategy. This caution is reflected in the changing dynamics of the OTT market, with fewer players willing to invest in high-budget Hindi films due to previous financial burns and slow subscription growth. Lata Jha writes about how two American companies - Netflix and Prime Video, are the ones calling the shots in Bollywood.  Learn more about your ad choices. Visit megaphone.fm/adchoices