To tide over the liquidity crisis, the Reserve Bank of India (RBI) today announced it would purchase government securities worth Rs 12,000 crore on Thursday through open market operations (OMOs).
“Consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions, RBI has decided to conduct open market operations by purchasing government securities for an aggregate amount of Rs 12,000 crore on December 29, through a multi-security auction,” the apex bank said in a statement. The auction is scheduled to be conducted by the bank at its Mumbai office.
The auction would have four price methods — government security (G-Sec) maturing in 2017 with a coupon of 7.49 per cent, G-Sec maturing in 2018 with a coupon of 7.83 per cent, G-Sec maturing in 2021 at 7.80 per cent and G-Sec maturing in 2022 at 8.08 per cent.
“There is an overall aggregate ceiling of Rs 12,000 crore for all the securities in the basket put together. There is no security-wise notified amount,” RBI said.
RBI deputy governor Subir Gokarn had last month said liquidity was likely to be under pressure for some more time, considering factors like advance tax payments.
The central bank had said deficit had exceeded its targeted one per cent of net demand and time liabilities. The bank has purchased government securities of over Rs 24,311 crore from the money markets in three installments, as part of its efforts to infuse liquidity into the system.
OMOs were RBI’s “first preference” while injecting liquidity, and there was an opportunity to raise up to Rs 2.74 lakh crore through this window, as banks’ government bond holdings stood at 29 per cent, five per cent over the prescribed statutory liquidity ratio of 24 percent, Gokarn had said.