The Reserve Bank of India’s (RBI) special and open market operations (OMO) have resulted in around Rs 1,60,000 crore flowing into the system.
This is in addition to the Rs 3,88,000-crore injection on account of special measures and cash reserve ratio reduction by 400 basis points effected earlier. A further Rs 40,000 crore was provided in the system due to the central bank’s decision to lower the statutory liquidity ratio (SLR) by a percentage point to 24 per cent.
Of the Rs 1,60,000 crore, around Rs 55,000 crore was on account of the special market operations (SMO) to purchase oil bonds issued by the government to oil marketing companies.
In addition, RBI is buying bonds worth Rs 46,000 crore through open market operations, of which deals worth Rs 36,000 crore have already been executed. Another Rs 45,000 crore would be by way of buyback bonds issued under the of market stabilisation scheme. However, the price at which RBI will purchase these bonds, and release funds into the government’s account, have not been made public.
The two steps were announced to address concerns over liquidity in the wake of the huge market borrowing programme announced by the government for the current and the next financial year. High market borrowings by the government will result in resources flowing into its coffers, instead of being deployed for lending purposes at a time when economic growth is slowing down.
The remaining amount of around Rs 15,000 crore, market sources said, was by way of acquisition bonds as part of regular market operations.
The SMO has not only ensured that Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum managed to get a better deal when they were reeling under a liquidity crunch due to crude oil prices reaching all-time high levels, but also helped maintain adequate liquidity in the system.
