The Reserve Bank will conduct open market operations (OMO) to purchase government bonds to infuse liquidity of Rs 10,000 crore on Thursday.
“Based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct purchase of government securities under open market operations for an aggregate amount of Rs 100 billion on September 8, 2016 through multi-security auction,” RBI said in a notification. As part of the OMOs, RBI will purchase government securities maturing in 2017 (bearing interest rate of 7.46%), 2022 (8.15%), 2025 (8.2%), 2017 (8.6%) and 2030 (7.88%).
RBI said it reserves the right to decide on the quantum of purchase of individual securities, accept less than the aggregate amount of Rs 10,000 crore or accept or reject any or all offers wholly or partially without assigning any reason. OMOs are the market operations conducted by RBI by way of sale or purchase of government securities to or from the market with an objective to adjust rupee liquidity conditions in the market on a durable basis.
If there is excess liquidity, RBI resorts to sale of securities and sucks out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI buys securities from the market, thereby releasing money into the market.
(With PTI inputs)