RBI to conduct first-ever OMO purchase of SDLs on October 22

Reserve Bank of India (RBI) will conduct its first-ever Open Market Operation (OMO) purchase of State Developments Loans (SDLs) on October 22, 2020. The OMOs worth Rs 10,000 crore will be conducted as a special case during the current financial year with an aim to improve liquidity and facilitate efficient pricing.

This is the first-ever OMO purchase of SDLs. The plan to conduct the OMO in SDLs was announced earlier on October 9, 2020, in the Statement on Developmental and Regulatory Policies.

"As announced in the Statement on Developmental and Regulatory Policies dated October 09, 2020, the Reserve Bank will conduct Open Market Operations (OMOs) in State Developments Loans (SDLs). It has been decided to conduct a purchase auction of SDLs under Open Market Operations (OMOs) for an aggregate amount of Rs 10,000 crores on October 22, 2020, keeping in view that this is the first-ever OMO purchase of SDLs. Depending on market response, the size of the auctions may be enhanced in the subsequent auctions," an RBI statement said.

The size of the auctions may be enhanced subsequently, depending on the market response. The RBI will purchase the SDLs through a multi-security auction using the multiple price method.

In the notification, RBI has said, "Accordingly, RBI will purchase the SDLs given in Annex-1 through a multi-security auction using the multiple price method. There is no security-wise notified amount." It added, the Reserve Bank reserves the right to:

Decide on the quantum of purchase of individual securities.

Accept bids for less than the aggregate amount.

Purchase marginally higher/lower than the aggregate amount due to rounding-off.

Accept or reject any or all the bids either wholly or partially without assigning any reasons.

The eligible participants should submit their bids in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber) system between 10:00 am and 11:00 am on October 22, 2020. Only in the event of system failure, physical bids/offers would be accepted.

The result of the auction will be announced on the same day and successful participants should ensure availability of requisite amount of securities in their SGL account by 12 noon on October 23, 2020.