The outcome of the Rs 8,000 crore on-tap sale of 10-year state development loans tomorrow and the Rs 9,000 crore twin auction of government securities, scheduled between August 1 and August 7, will decide whether an open market operation (OMO) is needed to suck out excess liquidity from the banking system, according to Bimal Jalan, the governor of Reserve Bank of India (RBI).
The banking system has been reeling under surplus liquidity over the last couple of months in the absence of credit offtake.
This is underscored by the fact that the apex bank has been regularly receiving bids in excess of Rs 25,000 crore at its repo window.
In fact, on Monday the central bank received bids aggregating a record Rs 33,000 crore at the repo.
Jalan was speaking on the sidelines of a function orgainsed by the National Association of Software and Service Companies (Nasscom).
Supported by ample liquidity, lower inflation, and good monsoon, the yield on the benchmark 7.27 per cent 2013 is ruling at lifetime lows.
This paper was last dealt at 5.629 per cent today compared with the previous day
