The Reserve Bank of India (RBI) today said it will pump in Rs 8,000 crore in the market on December 28 by buying government securities to ease the liquidity situation.

“Consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct Open Market Operations (OMOs) by purchasing...government securities for an aggregate amount of Rs 8,000 crore on December 28, 2012,” the RBI said in a statement.

As part of the OMOs, the RBI will purchase government securities maturing in 2017 (bearing interest rate of 8.07 per cent), 2022 (8.15 per cent), and 2027 (8.26 per cent).

The OMO, it added, would be held through the multi-security auction using the multiple price method.

The RBI on December 21 had pumped in Rs 7,912.22 crore in the system through the OMOs as against the notified amount of Rs 8,000 crore.

OMOs are the market operations conducted by the RBI by way of sale/purchase of government securities to/from the market, with an objective to adjust the rupee liquidity conditions in the market on a durable basis.

If there is excess liquidity, the RBI resorts to sale of securities and sucks out the funds from the financial system.

Similarly, when the liquidity conditions are tight, the RBI buys securities from the market, thereby, releasing liquidity into the market.

(This article was published on December 24, 2012)
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