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Saturday, 23 September 2017

Central Bank to Conduct the Sale of Govt Securities under OMO

The Reserve Bank of India (RBI) said in a release that it would sell government bonds worth Rs 100 billion through OMO route (Open Market Operations) through multi-security auction using the multiple price method to ease the liquidity situation. The release detailed that – based on the current assessment of prevailing and evolving liquidity conditions, the RBI has decided to conduct the sale of government securities under OMO for an aggregate amount of Rs 100 billion on Thursday, September 28, 2017 through multi-security auction using the multiple price method.

The assessment suggests that the market liquidity strain is likely to remain enduring considering the fiscal targets set for the year and projections for aggregate credit growth.

As part of the open market operations, the RBI will purchase govt securities maturing in 2017 (bearing interest rate of 8.07%), 2019 (7.28%), 2023 (7.16%) and 2027 (8.28%). There is an overall aggregate ceiling of Rs.100 billion for all the securities and there is no security-wise notified amount.

Open market operations (OMO) implies to the buying and selling of govt securities in the open market so as to expand or contract the amount of money in the banking system, facilitated by the central bank of a country.
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