RBI looks to infuse liquidity

Mumbai: The Reserve Bank will conduct open market operations (OMO) Thursday to purchase government bonds to infuse liquidity of Rs 10,000 crore.

"Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the Reserve Bank has decided to conduct purchase of government securities under Open Market Operations for an aggregate amount of Rs 100 billion on September 27, 2018 (Thursday)," the apex bank said. 

The purchase will happen through multi-security auction using the multiple price method, it said. As part of the OMOs, the RBI will purchase government securities maturing in 2020 bearing interest rate of 7.80 per cent, 2022 (8.20 per cent), 2025 (7.72 per cent), 2027 (6.79 per cent) and 2031 (6.68 per cent).

The RBI said it has the right to decide on the quantum of purchase of individual securities and can also accept offers for less than Rs 10,000 crore.  It may as well purchase marginally higher than the aggregate amount due to rounding-off effect, it said, adding it can also accept of reject any or all the offers either wholly or partially without assigning any reason.

OMOs are the tools which can be used to either inject or drain liquidity from the system. It is employed to adjust rupee liquidity conditions in the market on a durable basis. If there is excess liquidity, the RBI resorts to sale of securities and sucks out the rupee liquidity.