Amid recent liquidity concerns, the Reserve Bank of India (RBI) has decided to infuse Rs 8,000 crore through purchase of the government securities (G-secs) under Open Market Operations (OMO) on November 22, 2018. The Central Bank has decided this based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward. The OMO will help ease tight liquidity situation triggered by series of default by group companies of Infrastructure Leasing & Financial Services (IL&FS).
As part of the OMO, RBI will purchase government securities maturing in 2021 bearing interest rate of 7.80%, 2024 (8.40%), 2026 (8.33%), 2028 (8.60%) and 2032 (8.28%). The Central Bank said it has the right to decide on the quantum of purchase of individual securities and can also accept offers for less than Rs 8,000 crore. It may as well purchase marginally higher than the aggregate amount due to rounding-off effect and it can also accept or reject any or all the offers either wholly or partially without assigning any reason. The eligible participants should submit their offers in electronic format on the RBI Core Banking Solution (E-Kuber) system on November 22.
RBI had earlier stated that the system liquidity will move into deficit in the second half of 2018-19 and the evolving liquidity conditions would determine its choice of instruments for both transient and durable liquidity management. 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.
