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10-Oct2018

RBI to infuse Rs 12,000 crore into system to manage liquidity

In order to meet the festival season demand for funds, the Reserve Bank of India (RBI) will inject Rs 12,000 crore liquidity into the system through purchase of government bonds on October 11. The government will purchase bonds with maturity ranging between 2020 to 2030. The auction to purchase government bonds is a part of the Open Market Operations (OMO) to manage liquidity in the system which seems to be facing liquidity tightness.

The RBI has decided to conduct purchase of the government securities under OMO for an aggregate amount of Rs 120 billion on October 11, 2018 through multi-security auction using the multiple price method, based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward. It added that the result of the auction will be announced on the same day and payment to successful participants will be made during banking hours on October 12.

As part of the OMOs, the RBI will purchase government securities maturing in 2020 bearing interest rate of 8.27%, 2022 (8.15%), 2024 (7.35%), 2026 (8.15%) and 2030 (7.61%). 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 12,000 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. OMOs are the tools which can be used to either inject or drain liquidity from the system.


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