In an effort to infuse liquidity into the system, the Reserve Bank of India (RBI) will buy back securities worth Rs 10,000 crore on November 6. These bonds were sold earlier under the Market Stabilisation Scheme (MSS) to drain excess funds in the banking system.
The central bank will conduct an auction on November 7 to sell bonds worth Rs 10,000 crore as a part of the government’s annual borrowing programme. The government will offer Rs 6,000 crore, 8.24 per cent securities due in 2018 and Rs 4,000 crore, 8.28 per cent notes due in 2032 at the auction.
Call rates soften
The interest rates in the interbank lending market ended lower on improved liquidity after a 100-basis-point cut in cash reserve ratio (CRR), a portion of deposits that banks keep with the Reserve Bank of India.
Call rates ended at 7.25-7.50 per cent, much below its close of 17.00-17.50 per-cent on Friday. On Saturday, rates closed at 17.00-18.00 per cent in an illiquid market.
The apex bank, along with a CRR cut to 5.5 per cent, also reduced repo rate (the rate at which RBI lends cash to banks) by 50 basis points to 7.5 per cent and SLR by 100 bps to 24 per cent.
Bond prices down:
Government bond prices ended down on Monday because RBI decision to cut the Statutory Liquidity Ratio (SLR) to 24 per cent on Saturday hurt sentiment, dealers said.
The price of the 10-year benchmark 8.24 per cent, 2018 paper settled the day at Rs 104.54, down from Rs 104.97 on Friday.
