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The RBI on Friday said it will purchase Government Securities (G-Secs) under Open Market Operations (OMO) for ₹10,000 crore on September 19.
The move is based on the central bank’s assessment of prevailing liquidity conditions and the durable liquidity needs going forward.
OMOs are the market operations conducted by the RBI by way of sale/purchase in the market to adjust the rupee liquidity conditions on a durable basis.
When the RBI feels there is excess liquidity in the market, it resorts to the sale of securities, thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, it may buy securities from the market, thereby releasing liquidity into the market.
The central bank said it will conduct the OMO through a multi-security auction — of five G-Secs (maturing in 2020, 2022, 2027, 2030, and 2042) using the multiple price method (each bidder would get the allotment at the price he/ she has bid).
“There is an overall aggregate ceiling of ₹10,000 crore for all the securities in the basket put together. There is no security-wise notified amount,” the RBI said.
According to CARE Ratings,the RBI purchased securities amounting to ₹30,650 crore by way of open market operation in the current fiscal (up to July 19), notably higher than the ₹1,235 crore purchased in FY18 in an attempt to improve the liquidity situation in the system. There have been no OMO sales this year.
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