Centralbank to buy G-Secsworth ₹20,000 cr via OMO tomorrow
RBI will purchase long-term security maturing in 2024, 2028, 2030 and 2034
MUMBAI: The Reserve Bank of India (RBI) will purchase government securities worth ₹20,000 crore through open market operations (OMOs) with the aim of keeping yields in check and supporting an expanded government borrowing programme.
The central bank will purchase long-term security maturing in 2024, 2028, 2030 and 2034, according to an RBI notification on Monday.
“The Reserve Bank stands committed to ensure the availability of ample liquidity in the system to foster congenial financial conditions. On a review of current liquidity and financial conditions, therefore, the Reserve Bank has decided to conduct purchase of government securities under open market operations for an aggregate amount of ₹20,000 crore on 10 February 2021,” said the notification.
The bond market has been awaiting the RBI’s move on bond purchase through OMOs since the government announced in the budget its intent to raise ₹12 lakh crore through a borrowing programme for the next fiscal and an additional ₹80,000 crore for this year.
SO FAR, THIS FISCAL, RBI HAS UNDERTAKEN OMO PURCHASES OF GOVT SECURITIES WORTH ₹3.57 LAKH CRORE
RBI, in its monetary policy on Friday, however, did not provide any explicit guidance on this, which disappointed the market.
That said, the central bank made several announcements in the policy, aimed at maintaining ample liquidity to support the borrowing programme.
This included a gradual rollback of a previous 100 basis point cut in cash reserve ratio (CRR), the amount of deposits lenders must set aside as reserves, that was announced amid the pandemic. The CRR normalisation opens up space for a variety of market operations to inject additional liquidity,
RBI said.
RBI also announced the opening up of the sovereign bond market to retail investors and extended the period of dispensation of higher Held To Maturity limit till 2023.
These measures aimed at ensuring ample liquidity in the system failed to enthuse the bond market, which was expecting more clear signals from the central bank on the OMO calendar.
The banking system has been in liquidity surplus for
most of 2020. Besides the huge inflow of bank deposits, the various liquidity infusion measures undertaken by RBI, including OMO purchases, long-term repo operations, and targeted long-term repo operations have added to the liquidity surplus in the economy.
So far, this fiscal, the central bank has undertaken OMO purchases of government securities worth ₹3.57 lakh crore and OMO purchase of state development loans worth ₹30,000 crore.