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RBI to purchase G-sec worth Rs 12,000 crore to inject liquidity into the system

28 Dec 2011 Evaluate

In its bid to inject liquidity in the economy, the Reserve Bank of India (RBI) has decided to purchase government securities worth Rs 12,000 crore on December 29, 2011. The central bank will conduct open market operations (OMO) for purchasing the securities through multi-security auction using the multiple price method, the apex bank said in a statement.

The move by RBI is consistent with the stance of monetary policy and based on the current assessment of prevailing and evolving liquidity conditions. The apex bank, in its mid quarter monetary policy review on December 16, 2011, had stated that OMOs would be conducted as and when considered appropriate.

The RBI statement opined that auction will be in four price methods, government security (G-Sec) maturing 2017 with a coupon of 7.49%, G-Sec maturing 2018 with a coupon of 7.83%, G-Sec maturing 2021 with 7.80% and G-Sec 2022 with 8.08%. While there is an overall aggregate ceiling of Rs 12,000 crore for all the securities in the basket put together, there is also no security-wise notified amount.

In the past month, the central bank has also purchased government securities of over Rs 24,311 crore from the money markets in three installments as part of its efforts to infuse liquidity into the system.

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